A pending sale sign is placed in front of a house for sale in San Anselmo, California.
Justin Sullivan | fake pictures
According to the National Association of Real Estate Agents, pending home sales continued to increase in June, increasing 16.6% monthly since May and 6.3% since June 2019. This exceeds the expectation of the monthly profit, which was a 12.5% increase. It is the second consecutive month of earnings in contractual activity.
Real estate agents have also raised their forecast for the housing market due to what they say is an apparent change in the market. By 2020, existing home sales are expected to decrease by just 3%. New home sales are projected to increase by 3%.
The previous forecast for existing home sales in 2020 decreased 7.7%, and new home sales increased 1%.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to a year ago,” said Lawrence Yun, chief economist at NAR. “Consumers are taking advantage of record low mortgage rates that result from the Federal Reserve’s maximum liquidity monetary policy.”
The pending sales measure signed contracts on existing homes, thus showing that buyers went shopping during the month of June, just before the most recent increase in coronavirus cases. Sales soared in May, a staggering 44% compared to April.
The average 30-year fixed-rate mortgage rate in early June was approximately 3.24%, and by the end of June it dropped to around 2.95% according to Mortgage News Daily. Rates have been close to record lows, around 2.9% since then. The National Association of Real Estate Agents anticipates that rates will remain at or near 3% for the next 18 months.
This follows last week’s NAR report showing that existing home sales in June increased by an impressive 20.7% per month. That’s the biggest monthly gain since Real Estate Agents started tracking the data in 1968. This count is based on closings, and sales were even lower annually, at 11.3%.
One of the biggest problems remains the supply of existing homes for sale, which fell 18% annually in June to just 1.57 million homes according to the NAR. At current sales rates, that represents a four-month supply. Last June, 350,000 more houses were on the market. Supply increased just 1% per month from May to June. Yun says the price of wood is hurting builders.
“While the outlook is promising, the sharp increases in wood prices are troubling,” Yun said. “A reduction in rates, even if temporary, would help increase home construction and therefore stimulate faster economic growth.”
Regionally, pending home sales increased in all four regions of the United States. In the Northeast, sales increased 54.4% monthly and only 0.9% less than a year ago. In the Midwest, pending sales increased 12.2% monthly and 5.1% annually. In the south, the monthly increase was 11.9% and an increase of 10.3% annually. In the West, pending sales increased 11.7% monthly and rose 4.7% annually.
“The strong rebound in the Northeast comes after a longer blockade, while the South has consistently outperformed the rest of the country,” Yun said. “These remarkable rebounds speak of exceptionally high buyer demand.”
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