Pending homes sales declined in June, slipping 1.4 percent on the Pending Home Sales Index released this morning by the National Association of Realtors® (NAR). The Index, a forward looking indicator based on contract signings for home purchases, was 99.3 in June, down from 100.7 in May. The May figure was also revised down from an original estimate of 101.1.
Despite the decline in June, figures for the month are still 9.5 percent higher than they were in June 2011. This marks the 14th consecutive month when the index was higher than it had been during the same period a year earlier.
Lawrence Yun, NAR chief economist, said inventory shortages are a factor. "Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities," he said. "We've been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors."
"Any bank-owned properties that have been held back in markets with inventory shortages should be released expeditiously to help meet market demand," Yun said. "Housing starts will likely need to double over the next two years to satisfy the pent-up demand for both rentals and ownership."
The NAR press release cited its Realtors Confidence Index which is derived from a survey similar to the one conducted by the National Association of Home Builders in which its members are asked to gauge sales conditions and buyer traffic. The NAR version is based on responses from over 3,400 Realtors. The Index put buyer traffic at 60 while seller interest was at 41 which NAR said shows a large imbalance between buyers and sellers. A value of 50 implies neutral market conditions; the disparity between buyer and seller interest began to grow in early spring and has been in a particularly large imbalance for the past two months.
On a regional basis the Pending Home Sale Index fell 7.6 percent in the Northeast to 76.6 in June but is 12.2 percent higher than a year ago. In the Midwest the index slipped 0.4 percent to 94.4 in June but is 17.3 percent above June 2011. Pending home sales in the South declined 2.0 percent to an index of 106.2 in June remaining 8.8 percent above a year earlier. In the West the index rose 2.6 percent in June to 111.5 and is 3.0 percent higher than June 2011.
Yun said that some closings have been delayed, partially because of a surge in refinancing brought on by record low mortgage rates. These transactions, on top of a higher level of home purchases have slowed the closing process.
"In addition, there have been some delays with recent foreclosure sales as banks take steps to ensure there are no paperwork problems. This is causing an uneven performance in sales closings, which is likely to continue, but we also see notably higher levels of sales activity compared with a relatively flat performance in the preceding four years." Yun said.