Following moderating mortgage rates, pending home sales slipped only slightly in July, down 1% from June.
The National Association of Realtors’ Pending Home Sales Index posted a reading of 89.8 last month. A reading of 100 is equal to the level of contract activity in 2001.
Pending sales were down 19.9% YOY, slipping from last month’s 20% YOY reading.
It was the second consecutive month of decline and the eighth in the last nine months.
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings. This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity,” said NAR Chief Economist Lawrence Yun.
Zillow recently reported that competition for the lowest-priced homes in each market is now stronger than mid- and high-priced homes, reversing a pandemic trend.
“Buyers are stretched thin when it comes to affordability, and they are flocking to the lowest-priced homes on the market to get their foot in the door,” said Zillow senior economist Nicole Bachaud.
“Demand is lighter for homes at the top end of the market, and owners appear to be reluctant to sell and move to a different home that will presumably come with a much higher monthly payment at today’s mortgage rates.”
The monthly mortgage payment on a typical home jumped to $1,944, up 54%, or $679, from one year ago.
Three of the four major regions saw declines month-over-month. Pending sales in the Northeast dropped 1.9% from June and 15.4% YOY, while the Midwest index dropped 2.7% MOM and 13.4% YOY. Sales in the South fell 1.1% from June and 20% YOY.
The West, however, saw a bump of 2.2% from June, though it’s down 30.2% YOY.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” Yun said.
“With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”
The PSHI is a forward-looking indicator of home sales based on contract signings.