Pending home sales dropped in June, retreating after three consecutive months of solid growth and the latest sign the U.S. housing sector has suffered a setback as tight credit conditions and flat wages deter many potential home buyers.
The National Association of Realtors’ pending home sales index, a forward-looking indicator based on contract signings, slipped 1.1% in June from the prior month and was 7.3% below last year’s level. The month-to-month decline was below expectations, as observers had predicted a 0.3% increase according to a poll conducted by Bloomberg. Pending home sales fell in the Northeast and the South but grew in the Midwest and West.
“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” said Lawrence Yun, NAR chief economist.
But Yun said supply shortages still exist in parts of the U.S., and other factors — including tight credit conditions — have prevented some potential buyers from taking advantage of lower interest rates.
Key housing reports have indicated conditions remain choppy in the housing sector. Last week, the Commerce Department reported sales of new homes dropped a steeper-than-expected 8.1% in June from the prior month. But existing-home sales for June were at the strongest sales pace in eight months, according to a report by the NAR.
Some trends in the marketplace suggest the housing sector could perform better down the road. Inventory has been improving and price appreciation, which leapt last year, has moderated lately. And with rents ticking higher, more potential buyers could be lured to finalize a purchase. Yun on Monday said he expects “a slight uptick in sales during the second half of the year.”