Pending Sales Dip from May's Seven-Year High

Rising interest rates and home pricesrnare blamed for a slight dip in the number of pending sales in June the NationalrnAssociation of Realtors® (NAR) said today. rnNAR’s Pending Home Sales Index (PHSI) slipped 0.4 percent to 110.9 inrnJune compared to a revised index of 111.3 in May.  The May Index was originally reported at 12.1rnpercent but even with the downward revision it remains the highest PHSI sincernDecember 2006 when it was 112.8.   The June Index is 10.9 percent higher than inrnJune 2012 when it was 100.0.  </p

The PHSI reflects signed home purchase contractsrnand is a leading indicator of home sales. rnContracts are generally expected to become closed transactions withinrntwo months.  This does not always happen,rnhowever, and Lawrence Yun,rnNAR chief economist, said some sales cancellations in June could be linked tornhigher rates.</p

He noted that higher home prices and interest rates arernbeginning to impact affordability, notably in high-cost regions. rn”Mortgage interest rates began to rise in May, taking some of the momentum outrnof contract activity in June,” he said.  “The persistent lack of inventoryrnalso is contributing to lower contract signings.”</p

He added, “Therernare some homebuyers who sign contracts with strong lender commitment letters,rnbut have floating mortgage interest rates.  Those rates can be locked asrnlate as 10 to 14 days before closing, so some homebuyers may change their mindrnif the rate rises too much.  This, hernsaid, apparently happened with some sales scheduled to close last month.  “Closed sales may edge down a bit in thernmonths ahead,’ Yun continued, “but they’ll stay above year-ago levels.”</p

Contractrnsignings were variable by region.  ThernPHSI in the Northeast was unchanged at 87.2 in June but is 12.2 percent higherrnthan a year ago.  The index slipped in both the Midwest and the South,rndown 1.0 percent to 114.3 in the former and 2.1 percent to 118.3 in thernlatter.  On a year-over-year basis bothrnwere significantly higher, 19.5 percent in the Midwest compared to June 2012rnand 9.5 percent higher in the South.  Thernstrongest monthly performance was in the West where the index rose 3.3 percentrnin June to 114.2, and is 4.4 percent above June 2012.</p

Based onrnyear-to-date sales activity, and stable contract signings expected for thernbalance of the year, NAR projects existing-home sales to rise more than 8rnpercent in 2013.  Inventory shortages will lead the median price to risernby nearly 11 percent this year. </p

The PHSI isrnbased on a large national sample representing about 20 percent of transactionsrnfor existing sales.  An index of 100 isrnequal to the average level of contract activity in 2001, the year the index wasrncreased. 

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