Consider that May 2021 was the best month of May for real estate contract signings in 16 years, it may not come as a surprise that things cooled a bit in June. But the cooldown was ever so slight.
According to a new report from the National Association of Realtors, pending home sales fell by 1.9% in June, down just a bit from May’s record numbers.
However, the report showed that the decline in pending home sales, an indicator of future home sales based on signed real estate contracts, was not seen nationwide.
According to the report, pending home sales rose in both the Northeast and Midwest regions, while they fell in the South and the West. The increases in the Northeast and Midwest were by both less than 1%. Meanwhile, the decreases in the South and West were by 3% or more, which is why the overall number decreased.
"Pending sales have seesawed since January, indicating a turning point for the market," NAR Chief Economist Lawrence Yun said. "Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”
According to Yun, the declines in contract activity in the South and West were due to rapidly rising home prices.
"The moderate slowdown in sales is largely due to the huge spike in home prices," Yun said. "The Midwest region offers the most affordable costs for a home and hence that region has seen better sales activity compared to other areas in recent months."
But Yun suggests that home prices will begin to moderate somewhat as the weather gets cooler later this year.
According to Yun, that moderation will be driven by mortgage rates beginning to “inch up” later in the year. “This rise will soften demand and cool price appreciation,” Yun said.
That should help slow home price appreciation from its current pace of 14.1% this year to a more manageable 4.4% next year, Yun added.