Gains in Pending Home Sales Likely Short-Lived

Pending home sales broke a six-month streak of declines in May, but eonomists warn the increases likely are temporary. Contract signings - a forward-looking indicator of home sales based on contract signings - inched up 0.7% last month, according to the National Association of REALTORS.

Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transtition. Contract signings are down sizably from a year ago because of much higher mortgage rates causing pending homes sale to fall 13.6% nationwide as compared to last year.

Economists have pointed to rapidly rising mortgage rates to explain buyers growing more cautious. The monthly payment on a median-priced single-family home - when assuming a 10% down payment - has risen by about $800 since the beginning of the year due to the increase in mortgage rates. As a whole, rates have jumped 2.5 percentage points since January.

Trying to balance the housing market by choking off demand with higher rates is damaging to consumers and the economy. T

Higher rates is ultimately causing a signigicant decrease in demand as many previously financially applicable buyers that were in the market previously are no longer viable to move forward. Once supply increases to create a broader and more diverse inventory, the market has a much clearer way of balancing from there.

Unfortunately the issue remains that housing shortings are still an issue natuonwise and emphasize the growing need to increase supply.

Works Cited:

Melissa Dittmann Tracey. “Yun: Gains in Pending Home Sales Likely Short-Lived.” Realtor Magazine, 27 June 2022, magazine.realtor/daily-news/2022/06/27/yun-gains-in-pending-home-sales-likely-short-lived.

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