As the more current measures of existing and new home sales continue a precipitous decline, the more forward-looking metric of pending sales—homes under contract that haven’t closed yet—remains slightly more inconsistent, seeing a fractional drop month-over-month in July even as one region (the West) actually saw an increase.
Down 1% from June and 19.9% from July of last year, contract signings certainly remain deflated compared to the height of the market. But it is possible that this metric is showing a market near its low point, according to National Association of REALTORS® (NAR) Chief Economist Lawrence Yun.
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” Yun said in a statement. “This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
Affordability remains a primary concern, with NAR’s measure of national housing affordability hitting a 33 year low this summer. The monthly mortgage payment on a typical home has hovered around $2,000—$1,944 right now, up $679 or 54% from the same time last year.
Yun remained optimistic that current data supports a normalization of the housing market in the near future.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” he added. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”