Pending home sales dropped for the second consecutive month in July, recording a 1.0% month-over-month decrease resulting in an index reading of 89.9, according to data released Wednesday by the National Association of Realtors.
In May, the index rose slightly to 99.9, but it dropped 8% in June to 90.7. The Pending Home Sales Index has declined for eight out of the past nine months.
Year over year, the PHSI was down 19.9%, marking the 14th consecutive month of annual drops. An index of 100 is equal to the level of contract activity in 2001.
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” Lawrence Yun, NAR’s chief economist, said in a statement. “This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
According to NAR, housing affordability reached its lowest level since 1989 in June. When accounting for a 30-year fixed-rate mortgage and a 20% down payment, the monthly mortgage payment on a typical home jumped to $1,944, an increase of 54%, or $679, from a prior year.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” Yun added. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”
All four major US regions recorded year-over-year decreases in contract signings. The Western region saw the largest drop at 30.1% to a reading of 70.0. Compared to a year ago the three other regions posted double digit pending sales declines. Month over month, the South (106.6) and the Northeast (79.3) saw increases of 1.1%% and 1.9%, respectively. The Midwest (91.2) and the West (70.7) recorded monthly decreases of 2.7% and 2.2%, respectively.