US Pending Home Sales Strengthens Further

A survey conducted by Thomson Reuters revealed that the number of contracts signed by home-buyers for the month of July rose higher by 1.3%, more than the 0.6% rise forecasted by analysts. The rise drove the Pending Home Sales Index higher as it reached its second highest level in over 10 years to 111.3, below the 115 level posted for the month of April. Pending home sales on a year-on-year basis also rose 1.4% higher in July.

Significant gains were also posted by 3 of the 4 major regions in contract signings during the month. Reports from the National Associations of Realtors sowed that the region with the most gains in contract signings was the West who posted a 7.3% growth, as it drove the region’s index to highest level in over 3 years. The Midwest was the only region to report a slump, as it fell by 2.9%, as the Northeast and the South climbed 0.8% higher. Low mortgage rates and continuing job creation may be luring more would-be buyers into the market.

The average 30-year fixed-rate mortgage has held below 3.5% for nine consecutive weeks, Freddie Mac said last week. U.S. employers, meanwhile, have been generating jobs at a healthy clip in recent months. Nonfarm payrolls rose a seasonally adjusted 255,000 in July, the Labor Department said early in August. The August report is due out Friday.

The NAR chief economist, Lawrence Yun, said, “Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas. More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”

There has been a bright outlook for the housing market in the US economy in recent years, despite signs of slowing due to tight inventories and high prices. The Realtors group last week stated that the pace of existing-home sales dropped by 3.2% last month from June to a seasonally adjusted annual rate of 5.39 million. In another report, home prices were shown posting strong gains. The S&P Core Logic Case-Shiller Indices, encompassing the entire country climbed by 5.1% in the 12 months ending in June, very similar to the increase reported for the month of May.

“While some of the near-term signals on the housing market have been mixed, we still expect the housing recovery to continue over time,” said Daniel Silver, economist at J.P. Morgan Chase.

Market response to the data release was largely minimal, as the ICE US Dollar Index is remained close to unchanged territory, as the index currently trades 0.04% higher at 96.10. The stock market is experiencing slight weakness in morning trade. The S&P 500 is currently declining by 0.23% to 2,071.19 while the Nasdaq Composite is off by 0.18%% to 5,214.43. Gold is down modestly by 0.32% to $1,312 per ounce. WTI crude oil is trading lower by 1% to $45.87.