The number of contracts to purchase previously owned U.S. homes fell in July for the first time in three months, a sign that lower prices and borrowing costs aren’t luring in buyers.
The 1.3 percent decrease in the index of pending home sales followed a 2.4 percent gain the previous month, the National Association of Realtors said today in Washington. Economists forecast a 1 percent drop, according to the median of 40 estimates in a Bloomberg News survey.
Unemployment at 9.1 percent and the prospect of more foreclosures in the pipeline mean it may take years to clear the oversupply of houses, a sign the market is struggling to stabilize. The prospect of contract cancellations due to stricter underwriting standards and low appraisals means some signings may not translate into closings.
“Housing is still on the ropes,” Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said in a note to clients. Shepherdson said he was concerned that “the chaos in the stock markets might have persuaded a greater proportion of buyers to walk away after signing contracts,” leaving sales short of the level implied by the pending data.
Pending home sales declined in July but remain well above year-ago levels, according to the National Association of Realtors(R). All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.
The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.