The impact of rising mortgage rates continues to be felt, as pending home sales slowed in July according to the National Association of Realtors (NAR).
Nationally, the pending home sales index declined 1.3% to 109.5 in July, compared to a reading of 110.9 in the previous month, as noted by NAR’s Pending Home Sales Index (PHSI). However, despite rate hikes, pending home sales are up year-over-year, increasing 6.7% in July to a reading of 102.6.
While the PHSI is a forward-looking indicators based on contract signings and not closing, pending sales have stayed above year-ago levels for the past 27 months.
There seems to be an uneven pattern occurring around the country as rising rates impact contract activity in higher-cost regions, according to NAR Chief Economist Lawrence Yun.
The PHSI in the Northeast fell 6.5% to 81.5 in July, however, the index reading is 3.3% higher than a year ago.
While pending home sales slipped modestly in the Midwest by 1% in July, the index reading of 113.2 is still 14.5% above July 2012.
In the West, pending home sales slipped for July by 4.9% to a level of 108.6. Compared to year-ago levels, the index was down 0.4% from July 2012.
“The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown,” Yun said. “However, higher mortgage rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West.”
Additionally, more homes need to be built in the West to relieve price pressure, Yun added, or else the region could soon face “pronounced affordability problems.”
The South was the only region to experience a rise in pending home sales, as they rose 2.6% to an index reading of 121.5 in July, and are 7.7% higher than what they were a year ago.
Looking forward, NAR projects existing-home sales to increase 10% for all of 2013, totaling about 5.1 million, and reach approximately 5.2 million next year.
Written by Jason Oliva