Pending home sales mostly held steady last month as supply and affordability issues capped any larger boosts, the National Association of REALTORS® reported Wednesday. NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, showed contracts were on the rise in the Northeast and Midwest, which were mostly offset by drops in the South and West last month.
“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,” says Lawrence Yun, NAR’s chief economist. “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, and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth.”
Yun says that until inventory conditions improve, many prospective buyers will likely encounter situations of either being priced out of the market or outbid, due to the limited number of homes that are for sale. That said, the retreat of investors in the market may help some traditional buyers become more competitive. Sales to investors were at 11 percent in June, the smallest share since July 2009.
“Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy,” Yun says. “This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn.”
Overall, NAR’s PHSI inched up 0.2 percent in June to a reading of 111, compared to May’s 110.8 reading. Pending home sales are 1 percent higher than a year ago.