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US Pending Home Sales Rebound in July: NAR

H.S. Borji
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Contracts to buy existing homes rebounded in July, adding to the view the US housing sector was slowly emerging from a rough patch at the start of the third quarter.

The pending home sales index rose 3.3 percent in July following a 1.3 percent drop the prior month, the National Association of Realtors reported today. The median estimate of economists called for an increase of 0.5 percent.

Compared to July 2013, pending home sales were down 2.1 percent, following a 7.3 percent annualized drop the previous month.

July marked the third consecutive month the pending home sales index was above the 100 mark, which represents the average level of contract activity.

Compared to June, contract activity increased in three of the four US regions. The pending home sales index increased 6.2 percent to 89.2 in the Northeast, 4.2 percent to 119 in the South, and 4 percent to 99.5 in the West.

The index declined 0.4 percent to 104.6 in the Midwest, NAR data showed.

Pending home sales reflect contract activity for existing single-family homes, which represent the largest segment of the residential real estate market. They allow economists to forecast the pace of existing home sales, which are based on contract closings.

According to NAR chief economist Lawrence Yun, rising contract activity in July resulted from more favourable housing conditions.

“Interest rates are lower than they were a year ago, price growth continues to moderate and total housing inventory is at its highest level since August 2012,” Yun said in a statement. “The increase in the number of new and existing homes for sale is creating less competition and is giving prospective buyers more time to review their options before submitting an offer.”

Yun added, “More importantly, steady job additions to the economy are helping family finances and giving them added confidence to enter the market.”

August is expected to mark the seventh consecutive month job growth was above 200,000, according to forecasts. Employers added 209,000 nonfarm payrolls in July, bringing the 2014 monthly average to 230,000.

The unemployment rate is currently at 6.2 percent.

The Labor Department will release August nonfarm payrolls next week.

Today’s figures support the view the housing market was generally improving at the start of the third quarter. Earlier this month the NAR said existing home sales increased 2.4 percent in July to its highest level this year.

According to the Commerce Department, residential construction activity surged in July, as housing starts rose 15.7 percent and building permits increased 8.1 percent.

Meanwhile, homebuilder confidence in August rose to a seven-month high, according to the National Association of Home Builders.

However, a report on Monday showed new home sales declined unexpectedly in July, a sign affordability challenges were keeping buyers away from newly build homes. New home sales dropped 2.4 percent to 412,000 in July, following a 7 percent decline the previous month.

While home buying appears to be improving, Yun expects existing home sales to drop 2.1 percent this year to 4.98 million, compared to 5.09 million in 2013.

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