Pending Home Sales Slip in July but Remain Solid

pending homes sales
Gregory Bull/AP

WASHINGTON -- Fewer Americans signed contracts to buy U.S. homes in July, but the level stayed close to a 6½-year high. The modest decline suggests higher mortgage rates have yet to sharply slow sales.

The National Association of Realtors said its seasonally adjusted index for pending home sales declined 1.3 percent to 109.5. That's close to May's reading of 111.3, the highest since December 2006.

The small decline suggests sales of previously owned homes should remain healthy in the coming months. There is generally a one- to two-month lag between a signed contract and a completed sale.

Sales jumped to an annual pace of 5.4 million in July, the highest in 3½ years. That's consistent with a healthy housing market. Higher mortgage rates appeared to have had a bigger impact on new-home sales, which plummeted last month. That raised fears that rate increases were restraining the housing recovery.

But many economists note that home prices and mortgage rates remain low by historical standards. Consistent job gains and rising consumer confidence may also support sales in the coming months.

"Higher mortgage rates are clearly negative for housing, but other key drivers, including the labor market, confidence, and expectations for prices and interest rates still point to improvement," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients.

The average rate on a 30-year mortgage reached 4.58 percent last week, the highest level in two years and up from 3.35 percent in early May. Still, that's below the average since 1985 of about 7 percent, according to

Mortgage rates began to rise after Federal Reserve Chairman Ben Bernanke first signaled that the Fed might reduce its bond purchases later this year. The purchases have helped keep borrowing costs low.

Rising home prices and more construction have boosted economic growth and created more jobs. The housing recovery has provided crucial support to the economy when other drivers, such as manufacturing, have struggled.

However, gains in home prices may be starting to level off. Prices jumped 12.1 percent in June from a year earlier, according to the Standard & Poor's/Case-Shiller home price index released Tuesday. That's slightly slower than May's 12.2 percent year-over-year gain. But price increases slowed in June from May in 14 of the 20 cities tracked by the index.

The stabilization in prices isn't necessarily a bad thing, economists said, because it could keep homes affordable and help prevent a bubble from developing in the housing market.

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The Paterfamilia

"The average rate on a 30-year mortgage reached 4.58 percent last week, the highest level in two years and up from 3.35 percent in early May. Still, that's below the average since 1985"...

Let me see now almost 30 years ago, the rate was still higher... Oh, and you know those Labor numbers are higher too!!! Um... Sir... or Madam... The Labor Numbers that have went up represent those who are currently Unemployeed and seeking Jobs, or, LESS POTENTIAL HOME BUYERS!!! If, you meant to say that their are more Jobs now than 30 years ago, NO THERE ARE NOT...

What Jobs there are available now are PAYING LESS and the DOLLARS EARNED have DEVALUATED TOO in the last 30 years... What I'm seeing is a huge DROP since the BANKSTERS artificially raised, (ARTIFICIALLY BECAUSE THEIR PRIME RATE AND BOND BUYING HAVEN'T CHANGED YET) increasing any of their costs to justify the increase... This R-I-P-S O-F-F the entire Market... Brokers, Realtors and Consumers because the entire SEASON is now gone!!! NOTE: August has only 3 days left and we are already in BACK TO SCHOOL SALES...

My guess is that all your lowering of the last months increases each monthg and false reporting will catch up very quickly now that it is to late for everyone else EXCEPT the BANKSTERS who skewed us again!!! WATCH the FED won't even "TAPER" and all the FAT CATS just cut themselves a FAT HOG on the backs of the MIDDLE CLASS... A-G-A-I-N

I have to go PUKE!!! What a racket when the FEDERAL RESERVE CHAIR flails his arms and signals to his CORPORATE BUDDIES take another huge RAISE while Schools are out forcing FAMILIES into a Bottle Necked Time LIne... SHAME!!!

August 28 2013 at 5:59 PM Report abuse rate up rate down Reply