“The recovery has not taken place, but the housing recession is over,” says NAR’s chief economist, after the first pending-sales increase in three months.
WASHINGTON – Pending home sales registered a modest increase of 0.3% in June month-to-month – its first increase since February – according to the National Association of Realtors® (NAR). The South and West posted monthly losses, while sales in the Northeast and Midwest grew. All four U.S. regions saw year-over-year transaction declines.
“The recovery has not taken place, but the housing recession is over,” says NAR Chief Economist Lawrence Yun, “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.”
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 0.3% to 76.8 in May. Year over year, pending transactions fell by 15.6%. An index of 100 is equal to the level of contract activity in 2001.
Forecasting the future
NAR predicts the 30-year fixed mortgage rate will hit 6.4% before the end of this year and then decline a bit in 2024, dropping to 6.0%. It believes the unemployment rate will rise slightly to 3.7% this year and then increase to 4.1% in 2024.
“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun says. “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.”
- Existing-home sales to decrease 12.9% from 2022 to 2023 and settle at 4.38 million, before climbing 15.5% to 5.06 million in 2024.
- National median existing-home prices will remain steady, declining 0.4% to $384,900 before rebounding by 2.6% to $395,000 in 2024.
- The West – the country’s most expensive region – will see reduced prices, while the more affordable Midwest region is likely to see a small, positive increase.
- Housing starts will drop 5.3% from 2022 to 2023, to 1.47 million, before increasing to 1.55 million (5.4%) in 2024.
- Newly constructed home sales will increase from last year by 12.3% in 2023, to 720,000, due to additional inventory. And it will increase by another 13.9% in 2024, to 820,000.
- The national median new home price will decrease by 1.9% this year to $449,100, and then improve by 4.2% next year, to $468,000.
“It is critical to expand supply as much as possible to widen access to homebuying for more Americans,” Yun says. “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.”
Pending home sales regional breakdown:
- The Northeast PHSI rose 0.6% from last month to 67.1, a decrease of 16.7% from June 2022.
- The Midwest index jumped 4.3% to 77.6 in June, down 17.1% year-to-year.
- The South PHSI fell 1.4% to 93.3 in June, down 14.3% from the prior year.
- The West index fell 1.0% in June to 57.7, dipping 15.5% from May 2022
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