After showing signs of a recovery earlier in the summer, contracts to buy existing single-family houses and condominiums tumbled 5.5% in July as unease remained about high mortgage rates and prices.
Pending sales were down month over month in all four major US regions with the smallest decline in the Northeast, an area that has somewhat outperformed other parts of the country in recent months, according to the National Association of Realtors. July’s nationwide downturn followed a 4.8% improvement in June.
“A sales recovery did not occur in midsummer,” NAR Chief Economist Lawrence Yun said in a statement. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.”
The national index fell in July to 70.2, the lowest reading since the NAR began tracking it in 2001. The NAR’s index uses 100 as its baseline because that was the rate in 2001, the first year the index was in use. Over the past year the index has fluctuated from 76.7 in July 2023 to 78.3 in March to the low it's at now.
July's biggest decline since the previous month was in the Midwest, where the index fell 7.8%. In the South, the drop was 6.5%, in the West it was down 3.8%, and 1.4% in the Northeast.
Despite the decrease in July contracts, Yun forecast that recent mortgage rate declines “will no doubt” encourage more buyers to enter the market. But as Robert Broeksmit, CEO of the Mortgage Bankers Association, said in a statement last week, even as rates fell, so did applications to buy or refinance a home. That may indicate that people are waiting for the Federal Reserve to cut interest rates next month, potentially generating a more substantial drop in mortgage rates.
Seasonally adjusted existing home sales declined 2.5% in July from the same month last year to 3.9 million homes sold. The number of existing homes for sale at the end of July was 1.3 million, the NAR said last week, up 0.8% from June and 19.8% from one year earlier.
Data on new single-family transactions were brighter in July at 739,000 sales, up 5.6% from one year ago, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
“Sales volumes should climb but the path is unlikely to be linear and the total increase should be limited to the mid-single-digit percentage point over the coming year,” Jim Egan, a Morgan Stanley housing strategist, said on his company’s podcast this week.