There’s no doubt about it – the housing market is slowing down. Pending home sales fell 8.6% in June from the prior month, according to data released Wednesday by the National Association of Realtors. And brokerages and agents alike are settling in for a few more tough months.
The NAR’s index reading in June fell to 91.0 from 99.9 in May. Year over year, the Pending Home Sales Index was down 20.0%, marking the 13th consecutive month of annual drops. An index of 100 is equal to the level of contract activity in 2001.
“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” Lawrence Yun, NAR’s chief economist, said in a statement. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”
According to NAR, buying a home in June 2022 was roughly 80% more expensive than in June 2019. As a result, the trade organization said that nearly 25% of buyers who purchased a home three years ago would be unable to do so today, as they no longer earn the qualifying income to buy a median-priced home.
But Yun maintains a positive outlook for the housing market in early 2023: “Home sales will be down by 13% in 2022, according to our latest projection. With mortgage rates expected to stabilize near 6% and steady job creation, home sales should start to rise by early 2023.”
All four major U.S. regions recorded year-over-year decreases in contract signings. The Western region saw the largest drop at 30.9% to a reading of 68.7, followed by the South with a drop of 19.2% to 108.5, the Northeast with a drop of 17.6% to 80.9, and the Midwest with a decrease of 13.4% to 93.7.
