US Pending Home Sales Dive to Record Low in July — Evening Brief – 08.29.24

The National Association of Realtors (NAR) reported a 5.5% decrease in U.S. Pending Home Sales in July, which is a significant deterioration from the anticipated 0.2% growth and a decrease from the 4.8% rise in June. Sales decreased by 4.6% compared to the previous year, which was a slight improvement from the 7.8% drop in June but still fell short of the anticipated -2% loss.

The Pending Home Sales Index (PHSI) dropped to 70.2% in July, the lowest level since the index was established in 2001, as increasing prices and financing costs continued to pose challenges in completing the sale of previously owned homes.

The index is a leading indicator for the housing sector, based on existing home sales that are pending. A sale is marked as pending when the contract has been signed but the transaction has not yet closed, although the sale is normally completed within one or two months of signing.

“A sales recovery did not occur in midsummer,” NAR chief economist Lawrence Yun said. “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.”

Sales declined in all four US regions, particularly in the Midwest and South. The Northeast experienced the smallest reduction. According to Yun, the New England region has performed better than others recently. The Northeast PHSI declined 1.4% to 64.6, an increase of 2.4% from July 2023. The Midwest index dropped 7.8% to 67.8 in July, down 11.4% from the same period a year ago. The South PHSI declined 6.5% to 83.5 in July, falling 11.5% from the prior year. The West index fell 3.8% in July to 56.2, down 6.0% from July 2023.

“Current lower, falling mortgage rates will no doubt bring buyers into market, although we have yet to actually see modestly lower mortgage rates translate into more buying,” added Yun.

For nearly two years, the previously owned housing market has been constrained by high borrowing costs and dwindling inventory. While mortgage rates fell this month to their lowest level in almost a year, at 6.44%, high prices and limited inventory are discouraging prospective buyers who may still be waiting for lower rates.

Sales activity is expected to remain subdued. According to a survey conducted by the Conference Board on Tuesday, the proportion of consumers who intend to purchase a home within the next six months in August was the lowest it has been since early 2013.