Us Pending Home Sales Show Signs Of Slowdown Amid Record Prices

Slowdown in U.S. Pending Home Sales Amid Record High Prices

The U.S. housing market showed signs of cooling in June 2021, as the number of pending home sales dropped by 1.9% compared to May, according to the latest data from the National Association of Realtors (NAR). This decline, reflected in the Pending Home Sales Index, signals a potential turning point in the market, according to NAR's Chief Economist, Lawrence Yun. While the number of homes under contract increased in May, the June dip suggests that the market may be facing new challenges.

The main driver of this slowdown appears to be the sharp increase in home prices. In fact, May saw the S&P CoreLogic Case-Shiller Index report that home prices had reached record highs for the third time that year. The typical price of a previously owned home in June was $363,300, reflecting a 23% year-over-year increase. This surge in prices has caused some buyers to pull back, according to Yun, as many feel priced out of the market.

Despite this decline, sales activity remains strong in certain regions. The Midwest continues to see high contract activity due to its affordability, making it a more accessible market for buyers. In contrast, the South and West experienced drops in contract activity for new home sales in June.

It’s important to note that while June’s data shows a slowdown, this comes after a 13.1% year-over-year increase in pending home sales for May, along with an 8% month-over-month increase. Yun remains optimistic that the Midwest will continue to see strong sales, but cautioned that the high home prices may be a barrier for many potential buyers in other regions.

The NAR’s Pending Home Sales Index is considered a forward-looking indicator of future home sales activity, so June’s decline suggests that we may see a slowdown in closed sales in the next month or two, particularly in regions with less affordability. As the market adjusts to these high home prices, buyers and sellers alike may need to navigate a more challenging environment in the months ahead.