After two straight monthly gains, pending home sales unexpectedly dropped in July.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI fell 2.5% from 108.3 in June to 105.6 in July, largest monthly drop since March 2018. On a year-over-year basis, sales were 0.3% lower than a year ago.
Regionally, all four major regions saw a decline in the PHSI, ranging from a decrease of 1.6% in the Northeast to 3.4% in the West. Year over year, the PHSI in the Northeast and Midwest fell 0.9% and 1.2%, while sales in the South and West rose 0.1% and 0.3%.
NAR suggests economic uncertainty may help to explain why homebuyer demand is not consistent with lower mortgage rates. Meanwhile, a sizeable growth in inventory is urgently needed, as continuing tight inventory will drive up home prices, making access to homeownership more difficult.