Pending home sales dipped 0.4% in June, due in part to rising interest rates, according to the National Association of Realtors' (NAR) Pending Home Sales Index.
After reaching the highest level in over six years in May, contract signings dropped to an index ranking of 110.9 in June, down from 111.3 in May. Although pending home sales declined slightly, the rate of activity was nevertheless 10.9% higher than in June 2012.
Data used for the index reflects contracts but not closings.
Pending sales have been above year-ago levels for the past 26 months, and the pace in May was the highest since December 2006, when it reached 112.8, according to NAR.
Lawrence Yun, NAR chief economist, says higher home prices and interest rates are beginning to impact affordability, particularly in higher-cost areas.
"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," Yun says. "The persistent lack of inventory also is contributing to lower contract signings."
Yun notes not all contracts go to closing.
"There are some home buyers who sign contracts with strong lender commitment letters but have floating mortgage interest rates,’ he says. ‘Those rates can be locked as late as 10 to 14 days before closing, so some home buyers may change their minds if the rate rises too much, which apparently happened with some sales scheduled to close in June.’
Yun predicts closed sales will edge down in the months ahead but will stay above year-ago levels.
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