Pending home sales fell 5.4 percent in June compared to May and fell 0.3 percent from a year earlier, the National Association of Realtors reported Thursday, as a rise in mortgage rates and record-high national home prices cooled a market that had shown some momentum this spring.
Contract signings declined month-over-month in all four major U.S. regions. On an annual basis, the Northeast (up 2.2 percent) and Midwest (up 0.3 percent) posted modest gains, while the South (-0.9 percent) and West (-1.1 percent) declined, according to the report.
Lawrence Yun | Chief Economist at the National Association of Realtors
“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” NAR Chief Economist Lawrence Yun said in a statement, adding that continued job gains could help support housing demand.
NAR’s index tracks signed contracts rather than closings, so June’s drop could foreshadow future declines in existing-home sales activity over the next one to two months.
Just last week, NAR reported that June closings fell 2.4 percent to a seasonally adjusted annual rate of 4.09 million. This year is on pace to become the fourth consecutive year with home sales stuck around the 4-million mark.
At the same time, the median home price climbed 1.8 percent year-over-year to a new record $440,600, NAR’s report found. That was the 36th straight month with annual price gains.
Sam Williamson | Senior Economist at First American
“After a burst of resilience this spring, homebuyers took a step back in June,” Sam Williamson, senior economist at First American, said in a statement. “With mortgage rates climbing to their highest level in nearly a year and home prices still elevated, the math simply got harder to make work, especially for first-time buyers.”
Regional breakdown
- Northeast: -3 percent month over month; +2.2 percent year over year
- Midwest: -8.9 percent month over month; +0.3 percent year over year
- South: -4.1 percent month over month; -0.9 percent year over year
- West: -4.7 percent month over month; -1.1 percent year over year
The breadth of the decline is what makes it notable, Williamson said: “With contract signings falling in all four major regions, the broad-based decline suggests the recent run-up in mortgage rates is finally catching up with buyers’ wallets.”
The rate pressure has not let up since June ended. The average 30-year fixed rate rose to 6.65 percent in the week ending July 10, matching a nine-month high, according to the Mortgage Bankers Association, and purchase applications fell 7.3 percent that week.
“Other leading indicators point in the same direction,” Williamson said. “Mortgage purchase applications, another forward-looking gauge, have softened in recent weeks after climbing for much of the spring … Weaker applications alongside fewer contract signings suggest buyers and sellers are settling back onto the sidelines.”
Yun offered his own caution about reading too much into the monthly contract data, noting that “it is closing activity, not contract signings, that generates economic impact,” and that pending contracts don’t align perfectly with closed deals because of fallout rates and contract contingencies.
The Midwest — the most affordable of the four regions — posted the steepest monthly drop by a wide margin, though it held on to a small annual gain.
