By MATT OTT AP Business Writer
SILVER SPRING, Md. (AP) — More Americans signed contracts to buy homes in July, suggesting the current hot housing market could continue in the fall.
The National Association of Realtors said Thursday that its index of pending sales rose 5.9%, to 122.1 last month. It had plunged to a low of 69 in April, when buyers and sellers were forced to the sidelines by coronavirus closures and restrictions. An index of 100 represents the level of contract activity in 2001.
Contract signings are a barometer of eventual, finalized purchases over the next two months, so this month’s numbers point continued market strength in August and September.
Contract signings are now 15.5% ahead of where they were last year, after significantly trailing last year’s pace earlier in the year because of the pandemic.
Different reports over the past week have shown that sales of existing homes and new homes are both continuing to surge as large swaths of the country have opened back up this summer and people have figured out how to go about regular business despite the ongoing pandemic. Sales of new homes jumped 13.9% in July, while sales of existing homes climbed 24.7%.
Low interest rates have also pushed people into the market. Interest rates on a 30-year fixed rate mortgage are at historic lows around 3%.
Besides the uncertainty of the broader economy, which continues to see about a million people a week sign up for unemployment benefits, the biggest concern in the housing market is the continuing lack of available homes. Low supply of existing homes has forced buyers into the new home market, which has also seen its supply dwindle over the past year.
That shortage of homes for sale is boosting prices. The median price for an existing home topped $300,000 for the first time on record, coming in at $304,100. That’s up a sharp 8.5% from July 2019. The median price for a new home in July rose to $330,600, up 7.2% from one year ago.
All four regions saw more contract signings for the second straight month. The Northeast saw contract signing increase 25.2%; in the West they were up 6.8%. The Midwest saw gains of 3.3% and in the South contract signings were up 0.9%.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, NAR’s chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Prospective buyers missed most of the spring buying season due to pandemic-induced lockdown measures. With nearly all states at least partially reopened, the market is experiencing robust activity from the pent-up demand. According to Yun, there are no indications that contract activity will wane in the immediate future, particularly in the suburbs.
Yun forecasts existing-home sales to ramp up to 5.8 million in the second half. That expected rebound would bring the full-year level of existing-home sales to 5.4 million, a 1.1% gain compared to 2019. Yun projects existing-home sales to reach 5.86 million in 2021, supported by an economy that he expects to expand by 4% and a low interest rate environment, with the 30-year mortgage rate average of 3.2%.
“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” He added that he expects housing starts to average at 1.35 million in 2020 and to pick up in 2021, to 1.43 million.
Additional reporting by FWBP Staff