Pause in Sales Activity over Weak U.S. Home Purchase Contracts

Contracts to buy previously owned U.S. houses unexpectedly fell in June after five straight months of increase, suggesting some cooling in home resales activity after recent hefty gains.  The decline in contracts, which came on the heels of reports showing the pace of home price appreciation stalling in major cities and new home sales dropping, did little to change perceptions that the housing market recovery was on track given a tightening labor market.

“The June decline is a hiccup. It is important to bear in mind that there is still plenty of fundamental support for the housing market,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.  The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, declined 1.8 percent to 110.3.

Still, the index was the third highest reading for this year and contracts were up 8.2 percent from a year ago.  Pending home contracts become sales after a month or two, and last month’s drop pointed to a pause in sales of existing homes after they reached a near 8-1/2-year high in June.