US Pending Home Sales Drop

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Pending home sales in the U.S. decreased in July from the previous month as higher mortgage rates affected buyers, according the National Association of Realtors. 

The Pending Home Sales Index, based on contracts and not closings, decreased 1.3 percent to 109.5 in July from 110.9 in June. However, the forward-looking indicator is 6.7 percent higher than last's year's 102.6.

Pending sales have stayed above year-ago levels for the past 27 months, NAR reports. 

"The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown," NAR chief economist Lawrence Yun said in the release. "However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West." 

Existing-home sales, a better barometer of the market, are expected to increase 10 percent for all of 2013, totaling about 5.1 million sales and reaching almost 5.2 million in 2014, NAR reports. Supply imbalances in the market could fuel further home price increases. 

"More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems." Mr. Yun said. 

San Francisco and Las Vegas currently lead yearly increases in national home prices, according to S&P/Case-Shiller National Home Price Index. NAR expects the national median existing-home price will increase 11 percent this year. 

Pending home sales index by region:

• The PHSI in the Northeast fell 6.5 percent to 81.5 in July, but is 3.3 percent higher than a year ago. 

• In the Midwest the index slipped 1.0 percent to 113.2 in July but is 14.5 percent above July 2012. 

• Pending home sales in the South rose 2.6 percent to an index of 121.5 in July and are 7.7 percent higher than a year ago. 

• The index in the West fell 4.9 percent in July to 108.6, and is 0.4 percent below July 2012.