Pending home sales fell 20% in June from a year earlier, due to skyrocketing mortgage rates
A “Pending Sale” sign outside a home in Discovery Bay, California, on Thursday, March 31, 2022.
David Paul Morris | Bloomberg | beautiful pictures
The National Association of Realtors said on Wednesday, contracts signed to buy existing homes fell 20% in June from the same month a year ago.
On a monthly basis, pending home sales fell 8.6% more than expected in June. A Dow Jones survey of economists predicted a 1% drop.
The drop is concurrent with a jump in mortgage interest rate. The average of the 30-year fixed loan exceeded 6% in mid-June, according to Mortgage News Daily. It started the year around 3%. High exchange rate and inflation in the general economy are having a heavy impact on buyer sentiment.
“The home contracts will continue to slide as long as mortgage rates continue to climb, as has happened this year,” said Lawrence Yun, chief economist at NAR. “There are signs that mortgage rates may be at or very close to their cyclical highs in July. If so, pending contracts should also start to stabilize.”
Sales declines were widespread, with the South and West being the worst. In the Northeast region, pending sales were down 6.7% from May and down 17.6% from June 2021. Sales were down 3.8% on the month in the region. Midwest and down 13.4% year on year.
In the South, sales are down 8.9% monthly and 19.2% year-over-year, and in the West sales are down 15.9% monthly and 30.9% from June 2021. .
Another report on new home sales in June, also calculated by signed contracts, showed a similar decrease, according to the US Census. Builders are now offering more incentives to reduce their growing inventory, although prices are still higher than they were a year ago.
NAR is currently forecasting a 13% drop in total sales this year, but that sales will start to pick up in early 2023. Much of that will depend on the mortgage rate ending, however. .
George Ratiu, senior economist at Realtor.com, said: “Looking ahead, a slowdown in economic activity and a drop in business investment could lead to a moderate pace of mortgage rate hikes, as mortgage rates rise. investors shift their allocation to the safety of bonds”. “Combined with an increase in housing supply, we could see an improvement opportunity for homebuyers later this year.”
