Pending home sales ticked up in June
The 0.3% gain is the first increase in four months, NAR reported, suggesting that “the housing recession is over.”
- While pending home sales were up slightly from May to June, they dropped more than 15% year-over-year.
- As more new construction inventory hits the market, it could help balance the market, said NAR Chief Economist Lawrence Yun.
- We may be witnessing the end of the correction, but a significant turnaround may not occur until 2024, he added.
For the first time in four months, national pending home sales inched up. New data this morning from the National Association of Realtors notes a 0.3% increase in pending home sales for June but a drop of 15.6% from the same period last year.
On a regional basis, the Midwest — one of the more affordable parts of the country — saw the biggest gains in June with a 4.3% increase in pending home sales, while in the South, sales fell 1.4%, and the West saw a 1% dip.
'The housing recession is over'
The big takeaway from the data is that the housing market correction could be nearing its conclusion, NAR's chief economist Lawrence Yun said in the announcement.
"The recovery has not taken place, but the housing recession is over. The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers," Yun said.
Indeed, inventory of new homes remains strong with over 7 months of supply, this week's new home sales report noted. But inventory could remain an issue in the coming quarters if the pipeline dries up, Yun suggested.
"It is critical to expand supply as much as possible to widen access to homebuying for more Americans," Yun said. "Home prices will be influenced by how much inventory is brought to market. Increased homebuilding will tame price growth, while limited construction will lead to home price appreciation outpacing income growth."
Existing home sales should improve in 2024
New construction is carrying the weight of the housing market at the moment as existing home inventory remains very tight at under 3 months of supply. The situation with existing home inventory and prices has become so strained that there is currently only a $5,000 gap between the national median new home price and median existing home price.
But NAR expects existing home sales to finally see a turnaround in 2024. Their researchers expect to see existing home sales slide 12.9% between 2022 and 2023, but then climb 15.5% in 2024. And price trends will likely continue as well — home prices in the overheated Western markets are likely to keep cooling while the in-demand Midwest will continue to see modest price gains.
As always, the Federal Reserve, which announced another interest rate hike this week, will play a big role in how home prices and inventory shake out in the coming quarters, Yun said, suggesting that it's time to start reducing borrowing costs and mortgage rates.
"Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next."