July 27 (Reuters) – Contracts to buy previously owned homes increased in June for the first time since February, suggesting that the housing market is recovering from the low point of its recent declines.
The National Association of Realtors (NAR) said on Thursday that its Pending Home Sales Index, based on signed contracts that become sales after a month or two, rose 0.3% to 76.8 in June. Economists polled by Reuters had forecast a 0.5% decrease in contracts signed.
Although pending home sales were still down 15.6% in June on a year-on-year basis, there is a growing body of evidence that the housing market is bottoming out.
“The recovery has not taken place, but the housing recession is over,” said Lawrence Yun, the NAR’s chief economist. “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”
The inventory for existing homes is still at historically low levels, as many current home owners have mortgage rates locked in below 5%. But the dearth of existing home inventory is driving homebuilding, with new permits for construction hitting a 12-month high in June.
The NAR also predicted that the 30-year fixed mortgage rate would fall to 6.4% this year and to 6.0% in 2024.
The recent resilience of the housing market hinges on the Federal Reserve’s decisions about whether to raise interest rates in the coming months. Fed Chair Jerome Powell said on Wednesday the economy still needed to slow the economy and left the door open for more hikes at the next September meeting.
Reporting by Safiyah Riddle; Editing by Paul Simao
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