Pending Home Sales Index Falls Despite Lower Mortgage Rates

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ May Pending Home Sales Index (PHSI) FELL 2.5 percent in July to 105.6;
  • Year-year the index FELL 0.5 percent.

Trends:

  • Following one-month respite, the PHSI fell year-year for the 18th time in the last 19 months’;
  • The Index for July essentially gave back virtually the entire June gain

Data Source: National Association of Realtors (NAR)

Image result for pending home sales

Despite – or perhaps because of – continuing low mortgage rates, the National Association of Realtors’ Pending Home Sales Index fell in July essentially back to where it was in May.

The decline was reported as Freddie Mac said the average rate for a 30-year fixed-rate mortgage rose ever so slightly to 3.58 percent from 3.55 percent one week earlier.

The dip in pending existing home sales mirrored the decline in new home sales (contracts) as reported last week by the Census Bureau and Department of Housing and Urban Development.

According to the Census-HUD data, new home sales plunged 12.8 percent in July as the median price of a new home rose 2.2 percent or $6,800 to $312,800.

The lower mortgage rates have given home-sellers a bit of leeway to raise the asking price of an existing home, A year ago, the average rate on a 30-year fixed-rate mortgage was 4.52 percent.

Sales of existing single-family homes have struggled this year although the sales pace (closings) improved in July. For the first seven months this year, the annualized sales pace averaged 5,271,000, down 3.2 percent from 5,443,000 a year ago. The median price of an existing home rose 4.3 percent in the last year to $280,800.

Earlier this week, according to the Standard & Poor’s Case Shiller-CoreLogic Home Price Index, home prices rose 0.58 percent in June (the most recent survey month) and were up 3.1 percent year over year. According to both measures, however the rate of increase in home prices in slowing.

The housing market has shown weakness for the second straight year against slow rising earnings according to the Bureau of Labor Statistics. At the same time, a separate Census-HUD report continues to show a slowdown in construction of new single-family homes which multi-family construction has increased.

The weaker home sales market has had broader implications. In addition to a slowdown at related retail stores, the sales slump affected seniors who were counting on proceeds from the sale of their homes to fund retirement.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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