Pending home sales decreased for a seventh consecutive month in July, falling 0.7% to a score of 106.2 on the National Association of Realtors’ (NAR) Pending Home Sales Index.
That’s down from a score of 107.0 in June.
With last month’s decline, contract signings are now down 2.3% year-over-year.
Regionally, contract signings increased 1.0% in the Northeast and 0.3% in the Midwest but decreased 1.7% in the South and 0.9% in the West.
“It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth,” says Lawrence Yun, chief economist for NAR, in a statement. “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”
Increasing inventory in several large metro areas is likely to help cool price growth to more affordable levels going forward, NAR says.
Although supply and affordability headwinds are the biggest issue right now, Yun says it is important to note just how much the housing market has recovered since the depths of the financial crisis.
Today, thanks to several years of solid job growth, as well as safe lending and regulatory policy reforms, foreclosures sit near historic lows and record high home values have helped millions of households build substantial wealth.
“Rising inventory levels – especially if new home construction finally starts picking up – should help slow price appreciation to around two-and-four percent, which will help aspiring first-time buyers, and be good for the long-term health of the nation’s housing market,” Yun says.
Currently, Yun is forecasting that existing-home sales this year will reach about 5.46 million, a decrease of 1.0% compared with 2017.
Looking ahead to next year, existing sales are forecast to increase 2% and home prices around 3.5%.
