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June Pending Sales Index Barely Moves
Tight Supply To Blame, Economists Say


The Pending Home Sales Index put forth a meager gain in June, as economists blamed a tight housing supply and ever-rising home prices.

A tight housing supply and ever-rising prices prevented the Pending Home Sales Index from making a bigger gain in June than it did.

As it was, the index inched upward by a scant 0.2 percent to a reading of 111.0, and is now 1.0 percent higher on a year-over-year basis.

If not for the Northeast, a region where signings jumped 3.2 percent in June, the PHSI could have declined.

"Pending home sales were mostly unmoved in June, but did creep slightly higher as supply and affordability constraints prevented a bigger boost in activity," according to the National Association of Realtors. This happened as mortgage rates remained near all-time lows.

The PHSI is a forward-looking indicator based on contract signings, and has dropped from this year's peak level in April (115.0). Contract signings typically lead existing home sales by about two months.

While the Northeast bumped up its contract signings, and the Midwest (+0.8%) also recorded a slight gain, signings declined in the West (-0.7%) and the South (-1.3%).

"With only the Northeast region having an adequate supply of homes for sale, the reoccurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cool-down after a very active spring," said Lawrence Yun, chief economist for the NAR.

"Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6 percent from a year ago," Yun added. "Home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth."

On a positive note, sales to investors retreated to 11 percent in June from 18 percent in February. It is now at the lowest share level since July 2009, Yun said. Reasons for this trend include declining distressed properties and rising home prices.

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November 16, 2019, 2:39 pm PDT

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