The housing market began the second half of 2015 on a positive note, with pending sales rising in July. Led by a solid gain in the Northeast, contract activity in most of the country held steady last month and bodes well for Existing Home Sales to maintain their elevated pace, as we close out the summer. While demand and sales continue to be stronger than earlier this year, real estate professionals have reported since the spring that available listings in affordable price ranges remains sparse for would-be home buyers and are likely holding back sales from being more robust.
With inventory shortages likely to persist into the fall some analyst expect the national median existing-home price to increase by 6.3 percent in 2015 to $221,400. Total existing-home sales this year to increase 7.1 percent to around 5.29 million, about 25 percent below the prior peak set in 2005 of 7.08 million.
In light of the recent volatility in the stock market, it’s possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment. Overall, the prospects for ongoing strength in the housing market remain intact. The U.S. economy is growing, albeit at a modest pace and the labor market continues to add jobs, although wage growth continues to remain stagnant.
Uncertainty in the equity markets, even if the Fed raises short-term rates in September could stabilize long-term mortgage rates and preserve affordability for home buyers as investors move assets into treasury bonds.
The Pending Home Sales Index in the Northeast increased 4.0 percent to 98.8 in July and is now 12.1 percent above a year ago. In the Midwest the index remained unchanged at 107.8 in July, and is now 5.7 percent above July 2014.
Pending home sales in the South increased slightly at 0.6 percent to an index of 124.2 in July and are now 6.5 percent above last July. The index in the West declined 1.4 percent in July to 103.0, but is still 7.5 percent above a year ago.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed, but the transaction has not closed, though the sale usually is finalized within 60 days of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
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