Home-Sale Contract Signings Decline More Than Expected

Home-Sale Contract Signings Decline More Than ExpectedContract signings for the purchase of a home declined 1.3 percent to 109.5 in July from 110.9 in June, based on the Pending Home Sales Index from the National Association of Realtors.
That’s slightly worse than the projected drop by analysts as the market fights to absorb the impact of higher mortgage rates.
However, the index is 6.7 percent above July 2012 when it was 102.6. The data reflect contracts but not closings.
Pending sales have stayed above year-ago levels for the past 27 months.
Lawrence Yun, NAR chief economist, said there are uneven sales patterns around the country.
“The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown,” Yun said. “However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West.”
Yun added that more homes need to be built in the West to relieve price pressure, “or the region could soon face pronounced affordability problems.”
The NAR projects existing-home sales to increase 10 percent for all of 2013, totaling about 5.1 million, and reach about 5.2 million next year.
With ongoing supply imbalances, the national median existing-home price is expected to grow nearly 11 percent this year, and moderate to a gain of 5 to 6 percent in 2014, with rising construction taking some of the pressure off of home prices.
A Pending Home Sales Index of 100 is equal to the average level of contract activity during 2001, which was the first year examined by the NAR. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

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