Pending home sales were up in July, marking a second month of increases, but there is still lots of room for improvement.
NAR’s Pending Home Sales Index rose by 0.9% to a reading of 77.6 in July. An index of 100 is equal to the level of contract activity in 2001.
“The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple homebuying offers,” said NAR Chief Economist Lawrence Yun.
“Jobs are being added and, thereby, enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”
Only seven of the nation’s 200 largest metros have inventory levels close to their pre-pandemic averages.
Year-over-year, pending sales dropped by 14%.
Though existing home sales remain in a slump, new construction is booming, leading to old and new houses costing basically the same and making them more attractive to homebuyers.
“[T]here are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament,” Sam Khater, Freddie Mac’s Chief Economist, noted.
Rates averaged 7.31% this week, staying flat after a month of increases thanks to some treasury yield volatility. As a result, mortgage applications rose for the first time in five weeks.
But until rates sink closer to the 5-6% mark, potential buyers looking for homes they can afford will remain stuck. Sellers don’t want to give up their historically low rates without a big return, and the lack of inventory convinced them they’ll be able to fetch the same record-high prices buyers were shelling out two years ago. But with rates elevated and many Americans feeling economic anxiety, overpriced listings end up languishing online.
“I have a seller who made an offer on something and the broker said, ‘Oh, we’ve had higher offers than that and we turned them down. We’re not even going to consider it.’ There’s no sense of urgency,” Kimberly Jay, an associate real estate broker at Compass, told Curbed.
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