Pending home sales increased slightly in July for the sixth time in seven months, according to the National Association of Realtors (NAR).
The Pending Home Sales Index (PHSI), which is based on contract signings, increased 0.5 percent to 110.9 in July from an upwardly revised 110.4 in June and is 7.4 percent above 103.3 recorded in July 2014. Additionally, the index has increased year-over-year for 11 consecutive months and is the third highest reading of 2015, behind April (111.6) and May (112.3).
"Despite the ebbs and flows, the housing market is on solid footing that’s being bolstered by strong, broad-based job growth and more millennials creating their own households," said Selma Hepp, Trulia's chief economist. "As we saw earlier this week, the slowing of home sales price appreciation means that the frenzied and competitive markets that we’ve seen in recent years are finally calming down. This is a good thing for the market going forward and further evidence that we are far from bubble territory. Nationally, home prices are still about 20 percent below the previous peak, with exceptions in areas with strong job growth and a severe lack of inventory. All this said, the main impediments to home sales continues to be tight inventory and affordability."
Lawrence Yun, NAR chief economist, expects the national median existing-home price to increase during the rest of the year due to inventory shortages. National existing-home prices are forecast to increase 6.3 percent in 2015 to $221,400, while total existing-home sales are expected to increase 7.1 percent to about 5.29 million.
"In light of the recent volatility in the stock market, it's possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment," Yun said. "Overall, the prospects for ongoing strength in the housing market remain intact for now. The U.S. economy is growing—albeit at a modest pace—and the labor market continues to add jobs."
He adds, "Uncertainty in the equity markets—even if the Fed raises short-term rates in September—could stabilize long-term mortgage rates and preserve affordability for buyers."
The PHSI rose 4.0 percent in the Northeast to 98.8 in July, and is now 12.1 percent above a year ago, while in the Midwest, the index remained unchanged at 107.8 in July, and is now 5.7 percent above July 2014. Southern pending home sales increased 0.6 percent to 124.2 in July and are 6.5 percent above last July. The West index dropped 1.4 percent in July to 103.0, but is still 7.5 percent above a year ago.
"The positive pending sales report follows a strong 5.4 percent increase in July new home sales reported two days ago, and the 2.0 percent increase in July existing sales reported last week," said Stephen Melman, NAHB Director of Economic Services. "Following a week of wrenching equity market volatility, improved home sales, coupled with a strong GDP report today, suggests continued good news for the existing sales market and for builders in 2015."