Pending sales of existing homes in U.S. dropped 1.3% in July
INCREASING INTEREST RATES seem to be having a negative effect on home sales in the U.S., as July saw the second consecutive decline in the pending home sale index produced by the National Association of Realtors.
WASHINGTON - Fewer Americans signed contracts in July to buy previously owned homes, a sign that rising mortgage rates are starting to slow momentum in the housing market.
The index of pending home sales dropped 1.3 percent, the most this year, after a 0.4 percent decrease in June, figures from the National Association of Realtors showed Wednesday in Washington. Economists forecast no change in the gauge from the month before, according to a median estimate in a Bloomberg survey.
Mortgage rates at a two-year high and a limited number of existing homes are pushing some prospective buyers out of the market, threatening to slow the pace of the recovery in real estate. Improvements in employment and income growth would help provide additional fuel for housing, which has been a source of strength for the economy.
“There’s been some signs that higher mortgage rates have negatively impacted home purchase decisions over the past six weeks or so,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York, who correctly forecast the decline in pending sales. “The fact that the uptrend appears to have been curtailed by higher mortgage rates is somewhat of a concern.”
Estimates in the Bloomberg survey of 38 economists for pending home sales ranged from a decline of 3 percent to an increase of 5.3 percent.
The Standard & Poor’s Supercomposite Homebuilding Index declined 1.2 percent at 10:13 a.m. in New York. The S&P 500 rose 0.2 percent to 1,633.23 after dropping to an eight-week low yesterday amid concern over a possible military strike against Syria.
The Realtors’ report showed purchases increased 8.6 percent from July 2012 on an unadjusted basis.
The pending sales index was 109.5 on a seasonally-adjusted basis, the lowest in three months. A reading of 100 coincides with the average level of contract activity in 2001 and “historically healthy” home-buying traffic, according to the NAR.