July 2018 Pending Home Sales Seasonally Adjusted Index Remains In Contraction Year-Over-Year

The National Association of Realtors (NAR) seasonally adjusted pending home sales index remains in contraction year-over-year. Our analysis shows continued worsening of growth. The quote of the day from this NAR release:

… It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth

Analyst Opinion of Pending Home Sales

The rolling averages remain in negative territory. The data is very noisy and must be averaged to make sense of the situation. There is no signs of a surge in home sales despite the headline growth, and the long-term trends continue to be generally downward,

Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).

The NAR reported:

Pending home sales index declined 0.7 % month-over-month and down 2.3 % year-over-year (reported down 2.5 % last month).

The market [from Nasdaq / Econoday} was expecting month-over-month growth of -1.1 % to 1.0 % (consensus +0.0 %).

Econintersect‘s evaluation using unadjusted data:

the index growth rate accelerated 3.4 % month-over-month and down 0.5 % year-over-year.

The current trend (using 3 month rolling averages) is decelerating and in contraction.

Extrapolating the pending home sales unadjusted data to project August 2018 existing home sales would be down 3.1 % year-over-year for existing home sales.

From Lawrence Yun, NAR chief economist:

…. the housing market’s summer slowdown continued in July. Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity. It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth.

The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.

Pointing to annual changes in active listings data at realtor.com®, increasing inventory in several large metro areas, and especially many out West, will likely help cool price growth to more affordable levels going forward. Even as days on market remains swift in many of these areas, Denver, Santa Rosa, California, San Jose-Sunnyvale-Santa Clara, California, Seattle, Nashville, Tennessee, and Portland, Oregon were among the large markets seeing a rise in active listings in July compared to a year ago.