Contracts to purchase previously owned U.S. homes fell for the second straight month in July, the latest sign that economic activity slowed mid-summer as the Delta variant ramped up the rate of coronavirus infections and inflation pumped up prices.
The National Association of Realtors said on Monday that its Pending Home Sales Index fell 1.8 percent after declined a revised 2.0 percent in June. Analysts polled by Econoday had forecast a 0.3 percent gain.
The index is based on contracts signed last month. These turn into homes sales one to two months later.
“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” Lawrence Yun, NAR’s chief economist, said. “Inventory is slowly increasing and home shoppers should begin to see more options in the coming months.
Compared with a year ago, pending sales are down 8.5 percent. That’s largely due to the enormous rise in home buying last summer as families rushed out of city centers and sought out houses with more space for an era of social distancing, working from home, and remote schooling.
High prices may be keeping some would be buyers out of the market. The median existing home price for sales in July was $359,900, up 17.8 percent from July 2020’s $305,600. Sales of existing homes unexpectedly climbed in July, defying expectations for a slight downturn after gains in June. Homebuilder sentiment fell to a 13-month low in July and new home sales were weaker than expected, which set the stage for what was expected to be a softening in the market for previously owned homes. That didn’t show up in the sales numbers for July, which would have followed May and June contract signings, but now looks to have appeared in the July pending sales.
“Homes listed for sale are still garnering great interest, but the multiple, frenzied offers – sometimes double-digit bids on one property – have dissipated in most regions,” Yun said. “Even in a somewhat calmer market, a number of potential buyers are still choosing to waive appraisals and inspections.
Consumer sentiment held up through the end of July but weakened sharply in August, with the University of Michigan’s index falling to its lowest level in ten years.
“There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion,” said Richard Curtin, the chief economist of the consumer sentiment survey. “Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end.”