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U.S. home buyer demand remained steady in July, although consumers did not react significantly to easing mortgage rates. An index of so-called pending home sales from the National Association of Realtors, which represents signed contracts, not closings, was basically flat, rising 0.5 percent from an upwardly revised June reading.
The index is now up 7.4 percent from one year ago. Pending sales slipped in June but had otherwise been rising for five months.
"Contract activity in most of the country held steady last month, which bodes well for existing-sales to maintain their recent elevated pace to close out the summer," said Lawrence Yun, chief economist for the NAR in a release. "While demand and sales continue to be stronger than earlier this year, Realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust."
Closed sales of existing homes, based on contracts signed in May and June, increased two percent in July, according to NAR, as the number of homes for sale remained stubbornly low, and higher home prices continued to sideline first-time home buyers. Yun said he had expected to see more first-time buyers return to the housing market this summer and was surprised by their poor showing.
Mortgage rates, which had been rising in May and June, pulled back in mid-July, which may have brought more buyers to the table. Also, the expectation in July was that the Federal Reserve would begin raising interest rates in September. That may have pushed some buyers into the market, fearing higher rates.
A roller-coaster ride on the U.S. stock market, due to fears of China's economic woes, has more now believing the Fed will not raise rates this fall. It has, however, also added uncertainty for some home buyers.
"In light of the recent volatility in the stock market, it's possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment," said Yun. "Overall, the prospects for ongoing strength in the housing market remain intact for now. The U.S. economy is growing—albeit at a modest pace—and the labor market continues to add jobs."
Pending home sales in the Northeast increased 4 percent July from June and in the Midwest were unchanged. In the South, sales increased 0.6 percent. The West was the only region to see weakness, with pending home sales down 1.4 percent for the month.
Added Yun: "Uncertainty in the equity markets—even if the Fed raises short-term rates in September—could stabilize long-term mortgage rates and preserve affordability for buyers."