Thanks to a relatively steep drop in mortgage interest rates, according to the National Association of REALTORS® (NAR), pending home sales were up +2.8% in June 2019 compared with pending home sales in May. Signed contracts are a clear and well-trusted indicator of closed home sales one to three months out.
Additionally, sales of existing homes increased +1.6% compared with June 2018. This increase in sales of existing homes is the first annual gain in home sales in seventeen months.
Lawrence Yun, chief economist with NAR, said, “Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing when you combine all of that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”
According to the Mortgage News Daily, mortgage rates fell sharply from May and to June. The average rate for a 30-year fixed rate loan was at 4.29% on May 1 and 3.81% on June 30, 2019. Despite improving affordability due to lower mortgage rates, affordability was not improved “enough” due to prices continuing to be high and gaining in most markets. In fact, Mortgage News Daily said that the affordability gap widened in seven major markets in May 2019.
Danielle Hale, the chief economist with Realtor.com, said, “If mortgage rates remain near recent lows, we could see prices pick back up as a result of improved affordability as well as the possibility of more limited inventory available.” Supply, after rising the last five months, flattened in June and some expect inventory to be lower this fall with more competition in the market.
Regionally, the pending home sales index looked like this:
-Northeast – +2.7% m/m and +0.9% compared with last year
– Midwest – +3.3% m/m and +1.7% compared with last year
– South – +1.3% m/m and +1.4% compared with last year
– West – +5.4% m/m and +2.5% compared with last year
Yun summed things up by saying, “Homes are selling a breakneck pace, in less than a month on average, for exiting homes and three months for newly constructed homes. Homeowner equity in real estate has doubled over the past six years to now nearly $16T. But, the number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”