U.S. Pending Home Sales Rose 0.3% in June, Lack of Housing Supply

US pending home sales rose unexpectedly in June 0.3% month-over-month beating market expectations of a 0.5% fall. The first rise in four months as housing market struggles with high interest rates in limited supply. e unprecedented rate hikes delivered by the Fed. Contract signings increased in the Northeast and Midwest but declined in the South and West. For perspective year-on-year, pending home sales are down by 15.6 percent from June 2022 and marking a 25th straight month of declines.  All four U.S. regions saw year-over-year declines in transactions.

In March we saw a resurgence in mortgage rates and a banking crisis which could delay a much-awaited housing market turnaround.

Lennar

National Association of Realtors® Pending Home Sales

June 2023 Highlights

  • Pending Home Sales (M/M) June: 0.3% (exp -0.5%; prevR -2.5%)
  • Pending Home Sales (Y/Y) June: -14.8% (exp -16.3%; prevR -20.7%)
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United States Pending Home Sales MoM

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – rose 0.3% to 76.8 in May. Year over year, pending transactions fell by 15.6%. An index of 100 is equal to the level of contract activity in 2001.

“The recovery has not taken place, but the housing recession is over,” said NAR Chief Economist Lawrence Yun, “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”

Pending Home Sales by Region

  • The Northeast PHSI ascended 0.6% from last month to 67.1, a decrease of 16.7% from June 2022.
  • The Midwest index jumped 4.3% to 77.6 in June, down 17.1% from one year ago.
  • The South PHSI receded 1.4% to 93.3 in June, lessening 14.3% from the prior year.
  • The West index fell 1.0% in June to 57.7, dipping 15.5% from May 2022.

“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun added. “Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.”

NAR Forecasts

NAR forecasts the 30-year fixed mortgage rate will hit 6.4% in 2023, followed by 6.0% in 2024. While median home sales will decrease 12.9% from 2022 to 2023 (4.38 million), they will climb 15.5% in 2024 (5.06 million).

NAR expects existing-home sales to decrease 12.9% from 2022 to 2023, settling at 4.38 million, before climbing 15.5%, to 5.06 million in 2024. Compared to last year, national median existing-home prices will remain steady – declining 0.4%, to $384,900, before rebounding by 2.6% next year, to $395,000. The West – the country’s most expensive region – will see reduced prices while the more affordable Midwest region is likely to see a small, positive increase. Housing starts will drop 5.3% from 2022 to 2023, to 1.47 million, before increasing to 1.55 million, or 5.4%, in 2024.

“It is critical to expand supply as much as possible to widen access to homebuying for more Americans,” Yun said. “Home prices will be influenced by how much inventory is brought to market. Increased homebuilding will tame price growth, while limited construction will lead to home price appreciation outpacing income growth.”

Newly constructed home sales will increase from last year by 12.3% in 2023, to 720,000 – due to additional inventory in this segment of the market – and increase by another 13.9% in 2024, to 820,000. The national median new home price will decrease by 1.9% this year, to $449,100, and then improve by 4.2% next year, to $468,000.

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.

About the National Association of REALTORS®
The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.

Source: NAR

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