An unexpected decline in July contract signings for the purchase of previously owned homes shows the continuing impact of limited supply on the real estate market, National Association of Realtors figures released Thursday showed.
The index fell 0.8% (the estimate was a 0.3% gain) after a revised 1.3% advance. The gauge decreased 0.5% from July 2016 on an unadjusted basis. Three of four regions showed month-over-month declines.
The decline in contract signings, the fourth in the last five months, highlights that a limited number of properties for sale remains the biggest hurdle for the housing market. That's particularly true for those wanting to buy for the first time as rising home prices are outpacing gains in wages.
The Realtors group reduced its projection of sales this year to 5.49 million from last month's estimate of 5.56 million. Supply is failing to keep up with demand, and the outlook for sales is also less favorable because purchases in the Houston area will likely slow in the aftermath of Hurricane Harvey, the NAR projects.
"The housing market remains stuck in a holding pattern with little signs of breaking through," Lawrence Yun, NAR's chief economist, said in a statement. "The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace."
"Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9% lower than last July," Yun said. "The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell."
Purchase contracts dropped 1.7% in the South, the nation's largest region, from a month earlier, and fell 0.7% in the Midwest. Yun forecasts the national median existing-home price to rise around 5%, similar to the 5.1% gain in 2016.
