Pending home sales (contract signings on existing homes) slipped back in July, with housing demand slowed by the weak economic conditions and falling consumer confidence. The National Association of Realtors (NAR) revealed a 1.3% decline in the pending home sales index (PHSI) in July, to 89.7. This follows increases in the PHSI over the previous two months that were not consistent with the steady decline observed in existing home sales (closed sales) data. The discrepancy linked to a marked increase in contract cancellations in recent months.
Across the regions, declines were observed in the PHSI in the South (-4.8%), Northeast (-2.0%) and Midwest (-0.8%). However, conditions in the West continued to improve, with a 3.6% increase in the region’s PHSI—the third consecutive increase for this region.
The NAR maintain a positive outlook, noting in the release that “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It’s now a question of lending standards and consumers having the necessary confidence to enter the market.” NAHB agree with this assessment. Current conditions are very favorable for home buying, however we expect it to be some time before there is a notable loosening in bank lending standards due to the current weak economic environment. Therefore, we expect existing (and pending) home sales to bounce around current levels for the remainder of the year, before beginning to pick up in 2012.