The National Association of Realtors® (NAR)
blamed higher interest rates for the slipping home sales numbers reflected in its
pending home sales report. The Pending Home Sales Index (PHSI) figures
released today were down 1.3 percent from 110.9 in June to 109.5 in July. The PHSI is a forward looking indicator based
on contract signings. Completed
transactions are generally expected to follow within 60 days.
While recent contract signings are down,
the July PHSI is still 6.7 percent higher than its level in July 2012, 102.6. The index has remained above year-ago levels for
the past 27 months.
Yun, NAR chief
economist, noted the uneven pattern of the index in the various geographic
regions. "The modest decline in sales is
not yet concerning, and contract activity remains elevated, with the South and
Midwest showing no measurable slowdown. 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," he said. "More homes
clearly need to be built in the West to relieve price pressure, or the region
could soon face pronounced affordability problems."
The PHSI in
the Northeast fell 6.5 percent to 81.5 in July but is 3.3 percent higher than a
year ago. In the Midwest the index slipped 1.0 percent to 113.2,
remaining 14.5 percent above year-earlier figures. Pending home sales in the
South rose 2.6 percent to an index of 121.5 in July, 7.7 percent higher than a
year ago. The index in the West fell 4.9 percent in July to 108.6, and is
0.4 percent below July 2012.
existing home sales to increase 10 percent this year to about 5.1 million units
and rise to approximately 5.2 million sales next year. Due to inventory shortages prices are
expected to grow nearly 11 percent from 2012 to 2013 and then moderate to a 5
to 6 percent increase in 2014 as increasing construction of new homes takes
some pressure off of prices.
The PHSI is based on a large national sample, typically representing about 20 percent
of transactions for existing-home sales.
The index base of 100 is equal to the average level of contract activity during 2001, which was
the first year to be examined and, by coincidence a year which fell within the
normal range of home sales - 5.0 to 5.5 million.