HomeWorldPending home sales fall 8.6% in June

Pending home sales fall 8.6% in June

Outstanding homes fell 8.6% in June as high prices and rising mortgage rates caused a cooling in the once-hot housing market, the National Association of Realtors reported Wednesday.

Sales are down 20% from last year. Sales fell in all four regions of the country, with the West experiencing the steepest drop.

The report is the latest evidence that a key sector of the economy is slowing rapidly as the Federal Reserve raises interest rates and the economy reels under the pressure of higher borrowing costs and runaway inflation.

“Signs to buy a home will continue to fall as long as mortgage rates continue to rise, as they have this year to date,” said NAR chief economist Lawrence Yun. “There are signs that mortgage rates may be above or very close to a July cyclical high. If so, outstanding contracts should also start to stabilize.”

Sales rose in May after six months of declines as buyers scrambled to take advantage of rising home inventories and a brief drop in mortgage rates. But that now seems to be reversing.

Pending home sales are considered a leading indicator for the housing sector, as homes typically take 30-60 days to close after a contract is signed. Sales of new and existing homes have fallen in recent months as higher prices and rising mortgage rates have made homes less affordable.

“Housing markets are reflecting economic strains, between rising expectations of a recession and a stable job market that offers workers the benefits of higher wages,” said George Ratiu, senior economist and manager of economic research at Realtor.com. , before the report on Tuesday.

“With the Federal Reserve’s commitment to reduce inflation from June’s 9.1% by raising short-term interest rates, markets expect borrowing costs to continue to trend higher,” Ratiu added, “ higher prices are leaving less money in consumers’ wallets each month. , and for homebuyers to spend on a typical mortgage payment. The affordability crisis is the number one concern for many families this summer.”

On Tuesday, the Commerce Department reported that new home sales fell to their lowest level since the pandemic, falling 8.1% in June from May. There are reports that builders are discounting homes and offering incentives to move their inventory.

“New home inventory has grown to a 9.3-month supply at the current sales pace, which is the highest since May 2010,” Wells Fargo economists noted Tuesday.

“Builders have responded by lowering prices and offering incentives to buy down mortgage rates,” the bank added. “The median price of a new home sold in June was $402,400, which is more than $40,000 less than the previous month on a non-seasonally adjusted basis and marks the second month in a row that prices have fallen. The average sale price is now 7.4% above the level of a year ago”.

A slowdown in housing could have a ripple effect throughout the economy. Housing has been one of the strongest sectors since the coronavirus hit in March 2020. With many businesses and establishments closed during the early days of the pandemic, Americans have rushed to buy homes and renovate existing ones. This, in turn, led to higher purchases of related items such as lawn furniture, exercise equipment, and new appliances. However, that pushed prices much higher and led to shortages of key staples, triggering the inflation that now plagues the economy.

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