Pending sales for existing homes nationwide dropped by 0.7 percent in between July and June, and have now fallen for seven straight months on an annual basis.
The National Association of Realtors’ study of those sales suggests that the slowdown is because of high pricing. Pending sales in July were down 2.3 percent year over year. The organization’s analysis is based on contracts signed for existing single-family homes, condos and co-ops, also making it an indicator of what closed sales could look like in a month or two.
The western U.S. saw the biggest year-over-year dip in pending sales, dropping by 5.8 percent. Sales in the southern U.S., which has been one of the stronger regions in recent years, dipped by 0.9 percent.
NAR Chief Economist Lawrence Yun said those declines “weighed down” the overall national numbers. He said the latest numbers are a reflection of overheated markets, pointing to the western U.S. as the prime example.
Years of inadequate supply and strong job growth “have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it,” Yun said.
The latest S&P CoreLogic Case-Shiller Index suggested that pricing may be hitting a ceiling in many major U.S. metros. Home prices in 20 cities part of the index rose at their slowest pace since 2016. Climbing mortgage rates are also likely affecting the pace of price growth and sales.
Yun added that if new home construction picked up, prices would likely come down to a point that first-time buyers could afford again. First-time buyers spent around 23 percent of their income on a typical starter home in the second quarter, up 2 percent from the first quarter.
He predicted sales of existing homes this year would drop by 1 percent to 5.46 million and pricing would increase by around 5 percent.