The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis of pending home sales is more rosey – and projects relatively good home sales. The quote of the day from this NAR release:
The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.
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Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).
The NAR reported:
- Pending home sales index was down 1.8% month-over-month and up 8.2% year-over-year (last month 10.4% year-over-year).
- The market was expecting month-over-month growth of 0.4 % to 2.5 % (consensus 1.0%) versus the growth of -1.8 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth was up 3.1% month-over-month and up 11.1% year-over-year.
- The current trends (using 3 month rolling averages) declined but remains in expansion.
- Extrapolating the pending home sales unadjusted data to project July 2015 existing home sales, this would be a 7.7 % gain year-over-year for existing home sales.
Unadjusted 3 Month Rolling Average of Year-over-Year Growth for Pending Home Sales (blue line) and Existing Home Sales (red line)
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From Lawrence Yun , NAR chief economist:
…. although pending sales decreased in June, the overall trend in recent months supports a solid pace of home sales this summer. Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level. The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.
… existing-home sales are up considerably compared to a year ago despite the share of first-time buyers only modestly improving. The reason is that the boost in sales is mostly coming from pent-up sellers realizing their equity gains from recent years.
Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down. Unfortunately, because nearly all of these sellers are likely buying another home, there isn’t a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.
