David Paul Morris | Bloomberg | Getty Images Contracts signed to buy existing homes fell 20 percent in June compared with the same month a year ago, the National Association of Realtors said Wednesday. That’s the slowest pace since September 2011, with the exception of the first two months of the coronavirus pandemic restrictions, when sales dipped briefly and then rebounded sharply. On a monthly basis, pending home sales fell a larger-than-expected 8.6% in June. A Dow Jones survey of economists had predicted a 1% drop. The drop coincided with a sharp rise in mortgage rates. The average 30-year fixed loan topped 6% in mid-June, according to Mortgage News Daily. It started the year around 3%. High interest rates and inflation in the general economy are hitting the buying mood hard. “Home signings will continue to fall as long as mortgage rates continue to rise, as they have so far this year,” said Lawrence Yun, NAR’s chief economist. “There are indications that mortgage rates may be above or very close to a cyclical high in July. If so, outstanding contracts should also begin to stabilize.” The decline in sales was widespread, with the South and West seeing the worst. In the Northeast, pending sales fell 6.7% compared to May and are down 17.6% from June 2021. Sales were down 3.8% for the month in the Midwest and 13.4% year over year . In the South, sales fell 8.9% month-over-month and 19.2% year-over-year, and in the West, sales fell 15.9% month-over-month and 30.9% year-to-date. Another report on new home sales in June, also measured by signed contracts, showed a similar decline, according to the U.S. Census. Manufacturers are now offering more incentives to offload growing inventories, although prices are still higher than a year ago. NAR now projects that overall sales for this year will fall 13%, but that sales will start to pick up in early 2023. A lot of that will depend on where mortgage rates end up, though. “Looking ahead, a slowdown in economic activity and a slowdown in business investment could lead to a moderation in the pace of mortgage rate growth as investors shift allocations to the safety of bonds,” said George Ratiu, senior economist at Realtor.com. “Combined with an increase in housing supply, we could see improved opportunities for homebuyers later in the year.”
