US pending home sales fell 1% in July 2022, following a sharp 8.9% mom fall in June of 2022. Mortgage data has been weak as escalating mortgage rates and housing prices are impacting affordability for potential buyers. Pending sales fell in three of four major regions, with the West posting a small increase. US new home sales for July were much lower, down 12.6% month-over-month to a seasonally adjusted annual rate of 511,000 units (consensus 580,000) from a downwardly revised 585,000 (from 590,000) in June.
National Association of realtors pending home sales for month of July 2022
- Pending Home Sales (M/M) Jul: -1.0% (est -2.6%; prev R -8.9%)
- Pending Home Sales NSA (Y/Y): -22.5% (est -21.4%; prev R -20.1%)
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings. This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity” NAR Chief Economist Lawrence Yun said.
In June, housing affordability plummeted to its lowest level since 1989, according to NAR. Accounting for a 30-year fixed-rate mortgage and a 20% down payment, the monthly mortgage payment on a typical home jumped to $1,944, an increase of 54%, or $679, from one year ago.
Pending sales retreated in all four major regions:
- Midwest (-2.7%),
- Northeast (-1.9%)
- South (-1.1%)
- West (+2.2%)
- Year-over-year contract signings declined by double digits in each region, with pending sales in the West down 30%.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023. With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year”, Yun added,
About Pending Home Sales
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
Source: NAR
From The TradersCommunity News Desk