Home-Purchase Contracts Slow as Low Inventories Push Prices Higher

A widely followed index that measures “pending home sales” — or contract signings for the purchase of a home — slipped in June after five straight months of increases, according to the National Association of Realtors.
But Realtors are keeping a positive attitude, emphasizing that June’s figures were near May’s level, which was the highest in over nine years.

Nonetheless, tight inventories pushed the Pending Home Sales Index, down 1.8 percent to 110.3 in June — but is still 8.2 percent above June 2014 (101.9). Despite last month’s decline, the index is the third highest reading of 2015, and has now increased year-over-year for ten consecutive months.
Lawrence Yun, NAR chief economist, says although pending sales decreased in June, the overall trend in recent months supports points to a solid pace this summer.
“Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level,” Yun said. “The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.”
According to Yun, existing-home sales are up considerably compared to a year ago, despite the share of first-time buyers only modestly improving. The reason is that the boost in sales is mostly coming from pent-up sellers realizing their equity gains from recent years.
“Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down,” adds Yun.
But nearly all of these sellers are likely buying another home, so there isn’t a net increase in inventory, he added.
A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.”

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