Contracts to buy previously owned homes in the United States declined much more than expected in June, as elevated mortgage rates and record property prices continued to discourage potential buyers.
US Pending Home Sales Drop Sharply
The National Association of Realtors reported that its Pending Home Sales Index fell by 5.4% in June to 72.5.
Economists surveyed by Reuters had predicted a much smaller monthly decline of 0.5%.
Pending sales contracts usually become completed transactions within one or two months, making the index an important indicator of future housing-market activity.
Sales Decline Across Every US Region
Contract activity weakened in all four major US regions during June.
Compared with the same month a year earlier, pending home sales were down by 0.3%.
The broad decline suggests that affordability pressures are affecting buyers across the country rather than being concentrated in a small number of markets.
High Mortgage Rates Pressure Homebuyers
Mortgage rates are expected to remain elevated amid renewed tensions between the United States and Iran following the collapse of a fragile ceasefire.
Higher borrowing costs have made monthly mortgage payments more expensive, reducing the number of households able to afford a home purchase.
Record Home Prices Add to Affordability Problems
Lawrence Yun, chief economist at the National Association of Realtors, said the combination of mortgage rates near their highest level in almost a year and record national home prices is keeping the housing market subdued.
These conditions are particularly difficult for first-time buyers, who often have smaller deposits and fewer financial resources than existing homeowners.
Until mortgage rates or property prices begin to ease, demand in the US housing market may remain limited.
