US pending home sales increased by 0.9% in July, marking the second consecutive month of growth despite high home prices and rising mortgage rates. The National Association of Realtors (NAR) reported stronger-than-expected numbers for pending home sales, defying predictions of a decrease from June. However, compared to last year, pending transactions decreased by 14%.
Lawrence Yun, the chief economist of NAR, noted that the slight increase in contract signings suggests potential for further growth, as many individuals have missed out on multiple home buying opportunities. The combination of escalating mortgage rates and limited housing inventory has temporarily hindered the ability of prospective buyers to enter the market.
Pending home sales varied regionally, with a decline in the Northeast and Midwest, but an increase in the South and West. Affordability challenges are anticipated to keep sales subdued, as the shortage of available homes affects nationwide sales. Few homeowners with low mortgage rates are willing to sell their properties and purchase new ones at higher rates. This situation presents an opening for new construction homes to supplement the limited inventory.
Although builders are capturing a larger portion of home sales, high prices and mortgage rates have dampened homebuyer demand. Additionally, rental trends that are beginning to ease could further diminish housing demand. Consequently, overall home sales activity is expected to remain relatively stagnant in the coming months due to limited options and affordability challenges.