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Pending home sales posted a modest increase in June — the first time the metric has seen a monthly increase since February, according to data released Thursday by the National Association of Realtors.
The number of homes under contract inched up 0.3 percent between May and June to a measure of 76.8 on the Pending Home Sales Index — 15.6 percent lower than they were in June 2022, according to the data.
NAR Chief Economist Lawrence Yun declared that while a recovery is still on the horizon, the worst of the housing slowdown appears to be behind us.
“The recovery has not taken place, but the housing recession is over,” Yun said. “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”
Pending sales in the Northeast jumped 0.6 percent from May to June, while remaining 16.7 percent lower than June 2022, while the Midwest jumped 4.3 percent to a reading of 77.6 in June, down 17.1 percent from a year ago. In the South, pending sales drooped 1.4 percent to 93.3 during June, 14.3 percent lower than the same time last year, while pending sales in the West fell 1 percent to 57.7, a 15.5 percent lower score than last year.
June is normally among the busiest homebuying months, but pending sales remained comparatively low this June illustrating the housing market stalemate brought about by high mortgage rates and an overall lack of inventory.
“June is usually prime homebuying season, so normally we’d expect a stronger showing. But given the affordability and inventory challenges currently faced by buyers, any improvement is notable,” Kate Wood, home and mortgage expert at NerdWallet said in a statement. “An increase in the inventory of new and existing homes, lower mortgage interest rates, or ideally, both, is needed to spur buyer activity.”
Yun forecasted that mortgage rates would cool through the second half of the year, leading to buyers returning in full force by 2024. The NAR’s official prediction is that rates for a 30-year fixed rate mortgage will hit 6.4 percent this year and then decline to 6 percent in 2024, while the unemployment rate will rise slightly to 3.7 percent in 2023 before increasing to 4.1 percent in 2024.
“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun said. “Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.”
NAR also forecasted that existing home sales would fall a total of 12.9 percent between 2022 and 2023 to an annual level of 4.38 million before climbing 15.5 percent, to 5.06 million in 2024 with national median existing-home prices declining 0.4 percent to $384,900, before rebounding by 2.6 percent next year, to $395,000.
Sales of newly constructed homes however will increase from last year by 12.3 percent to 720,000, NAR predicted, as homebuyers turn to new builds as an alternative to existing homes, which remain scarce.
“It is critical to expand supply as much as possible to widen access to homebuying for more Americans,” Yun said. “Home prices will be influenced by how much inventory is brought to market. Increased homebuilding will tame price growth, while limited construction will lead to home price appreciation outpacing income growth.”
