Pending home sales step back in June

The Pending Home Sales Index (PHSI), slipped 1.9% to a reading of 112.8 in June, the National Association of Realtors (NAR) reported today.

The index is a forward-looking indicator of home sales based on contract signings with a reading of 100 equal to the level of activity in 2001.

While demand is strong, home prices are turning buyers away.

“Pending sales have seesawed since January, indicating a turning point for the market,” said Lawrence Yun, NAR chief economist. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.

The economist expects mortgage rates will start to inch up toward the end of the year. “This rise will soften demand and cool price appreciation.”

Yun forecasts that mortgage rates will start to inch up toward the end of the year with the 30-year fixed e rate likely to increase to 3.3% by the end of the year and average 3.6% in 2022.

 “This rise will soften demand and cool price appreciation,” Yun said.

Here’s how pending home sales break down by region:

• The Northeast PHSI increased 0.5% to 98.5 in June, an 8.7% rise from a year ago. 
• In the Midwest, the index grew 0.6% to 108.3 last month, down 2.4% from June 2020.
• Pending home sales transactions in the South fell 3% to an index of 132.4 in June, down 4.7% from June 2020. 
• The index in the West decreased 3.8% in June to 98.1, down 2.6% from a year prior.