Contract signings to purchase a home fell in July, marking the seventh consecutive month that pending home sales have dropped on an annual basis, the National Association of REALTORS® reported Wednesday.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 0.7 percent to a reading of 106.2 in July. Contract signings are down 2.3 percent year over year. Declines in the South and West weighed down overall activity in last month’s index, NAR notes.
“It’s evident in recent months that many of the most overheated real estate markets—especially those out West—are starting to see a slight decline in home sales and slower price growth,” says Lawrence Yun, NAR’s chief economist. “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”
Yun says inventories are rising in some large metros, notably out West including Denver; Santa Rosa, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; Seattle; and Portland, Ore. The uptick in inventories will likely help moderate price growth, he says.
“Rising inventory levels, especially if new home construction finally starts picking up, should help slow price appreciation to around 2 and 4 percent, which will help aspiring first-time buyers, and be good for the long-term health of the nation’s housing market,” Yun says.
