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U.S. Pending Home Sales Show Substantial Pullback In July

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After reporting a sharp increase in U.S. pending home sales over the two previous months, the National Association of Realtors released a report on Thursday showing a significant pullback in pending home sales in the month of July.

NAR said its pending home sales index tumbled by 2.5 percent to 105.6 in July after surging up by 2.8 percent to 108.3 in June. The steep drop came as a surprise to economists, who had expected pending sales to come in unchanged.

With the monthly decrease, pending home sales in July were down by 0.3 percent compared to the same month a year ago after showing a 1.6 percent year-over-year jump in the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

"Super-low mortgage rates have not yet consistently pulled buyers back into the market," said NAR chief economist Lawrence Yun.

He added, "Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes."

NAR said the pullback in pending home sales reflected decreases in contract activity in all four regions, with pending sales in the West showing a particularly steep 3.4 percent decline.

Pending home sales in the South and Midwest also plunged by 2.5 percent and 2.4 percent, respectively, while pending sales in the Northeast slumped by 1.6 percent.

Looking ahead, Yun said home sales will get a short-term boost from lower mortgage rates, but he expects existing home sales in 2019 to be flat at 5.34 million due to the level of sales in the first seven months of the year.

The median price of existing homes is expected to continue increasing amid tight inventory conditions, although the pace of home price growth is expected to slow to 4 percent in 2019 and 3 percent in 2020.

"A boost to home building would greatly improve economic growth," Yun said, noting low inventory numbers impact the nation's overall economy.

"More free market prices on construction materials without government interference about where homebuilders have to get their supply will also help produce more and grow the economy," he added. "The housing industry cannot grow without more supply."

Yun expects GDP growth to ease to 2.0 percent in 2019 and 1.6 percent in 2020, although he noted growth predictions are somewhat uncertain due to trade tensions.

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