U.S. pending home sales rose in July by more than forecast to the highest level since 2005, signaling the housing market’s sharp recovery will continue with borrowing costs to stay low for the foreseeable future.
The National Association of Realtors’ index of contract signings to purchase previously owned homes increased 5.9 per cent from the prior month after a 15.8 per cent jump in June, according to data released Thursday. The median forecast of economists surveyed by Bloomberg called for a 2 per cent gain. Compared with a year ago, pending sales were up 15.4 per cent on an unadjusted basis.
The gauge’s rebound following an initial decline at the pandemic’s start shows that housing continues to be an area of strength for the recovering U.S. economy, in part because people are looking for more space while being stuck at home. That said, unemployment remains elevated and income uncertainty could slow demand for residential real estate.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” Lawrence Yun, NAR’s chief economist, said in a statement. Anecdotally, agents are saying that “scarce inventory remains a problem,” Yun said.
Pending home sales rose 25.2 per cent in the Northeast and 6.8 per cent in the West. Gains were smaller in other regions, with a 3.3 per cent increase in the Midwest and 0.9 per cent in the South.
The NAR revised its projection for existing home sales this year to 5.4 million units, up from a prior forecast of 5.18 million units. The group also estimates new-home sales of 800,000, up from 704,000.
A separate report on Tuesday showed that purchases of new single-family houses rose to their highest level since 2006 in July, further highlighting the surge in demand for housing.