Sales of US homes rebound in June but lack of properties hold back growth
Contracts to buy previously owned US homes rebounded in June after three straight monthly declines, but the housing market remained constrained by a shortage of properties available for sale.
Other data on Monday showed that factory activity in the Midwest slowed this month after hitting a three-year high in June, with manufacturers reporting declining orders.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, jumped 1.5 per cent, more than double economists’ expectations for a 0.7 per cent increase. The rise, however, only partially unwound the prior three months’ declines.
Pending home contracts become sales after a month or two. The NAR reported last week that existing home sales, which generally have been running ahead of the signed contracts, fell 1.8 per cent in June.
“In the very near term, the June increase in pending sales suggests that existing home sales will likely increase soon,” said Daniel Silver, an economist at JPMorgan in New York. “But the June increase for the index undid only a portion of the decline reported over the prior few months.”
Silver said he still expected the housing market recovery to continue over time despite recent weakness in some of the data, including homebuilder sentiment. The housing market has been stymied by a dearth of properties, which has pushed up prices and sidelined first-time homebuyers.
Housing contracted in the second quarter at its fastest pace in nearly seven years and was a drag on economic growth. Homebuilders have been unable to bridge the housing inventory gap, citing rising lumber costs and shortages of land and labour.
Pending home sales increased 0.5 per cent from a year ago. In June, contracts rose 0.7 per cent in the Northeast and advanced 2.1 per cent in the South. They shot up 2.9 per cent in the West but fell 0.5 per cent Midwest.