Rising mortgage rates together with rising home prices are cutting into sales of existing homes, according to the National Association of Realtors (NAR) whose pending home sales index for June is down 0.4 percent.
This report tracks contract signings and the NAR notes that rising rates are making prospective buyers change their minds which helps explain why strength in this report for May did not translate to strength for existing home sales in June. Typically, about 80 percent of pending home sales become existing home sales within two months.
Regional data for June show another gain, at plus 3.3 percent, for the West where real estate activity continues to be very strong. But other regions are flat including slight declines in the Midwest and South.
Another factor hurting sales is a continued lack of supply on the market which, however, may begin to ease as prices rise. Next US housing data on the Econoday calendar will be tomorrow morning with the Case-Shiller home price report.
Market Consensus before announcement
The pending home sales index jumped 6.7 percent in May, following a 0.5 percent dip in April. The May index level of 112.3 was the highest since the boom days of 2006. The year-on-year gain for the index is 12.1 percent, which is interestingly right in line with low double-digit gains for many home-price readings. The rise in mortgage rates that began in May appears to have lifted sales on fears that rates and prices would go up in coming months