For the second straight month, pending home sales have dropped in the month of July. After a month of June that saw a drop of 8.6% in pending home sales, the month of July posted a drop of 1%. This is significant as pending home sales are considered to be leading indicators of the housing market. When analyzing year-over-year home sales, we see that pending home sales have dropped by 19.9%.
What does this mean?
As mentioned above, pending homes sales are a leading indicator of the housing market and typically precede existing-home sales by a month or two. Lawrence Yun, chief economist for the National Association of Realtors®, recently shared the following quote in a press release: “In terms of the current housing cycle, we may be at or close to the bottom in contract signings. This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
Unfortunately, housing affordability remains at record lows throughout the country. For example, the monthly mortgage payment on a typical 30-year fixed-rate loan with a 20% down payment jumped to $1,944 in July, an increase of 54%, or $679, from a year ago. Although home prices have still been rising by double digits year-over-year, annual price appreciation is expected to moderate to a more historical rate of 5% or so by the end of the year and into 2023. Of course, other economic factors such as inflation and the depth and length of the current recession will also factor into housing. The upcoming mid-term election will also factor into the overall economy as well as housing. Assuming mortgage rates stabilize in the coming months and the overall job market remains healthy, we could see home prices begin to increase once again by next spring.
As always, all real estate is local. In South Florida, we continue to see increased demand from more Americans moving into the area. If you are in the South Florida market, feel free to contact Natasha at Live South Florida Realty, Inc. today! Be sure to download the free Florida Home Search app as well!