The National Association of Realtors reported Wednesday that a leading indicator for the housing sector fell in June after five consecutive months of growth. The reading is still the third highest recorded in 2015.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 1.8% to 110.3 in June but remained near May’s level of 112.3, which was the highest in over nine years, according to NAR. While June’s reading is down from May, it is still 8.2% higher than June 2014 (101.9).
In June of this year, sales of existing homes valued at $1 million and up represented 2.5% of a total of 573,000 transactions that month. The rate was unchanged from a year ago but it was the highest so far this year.
Lawrence Yun, NAR chief economist, said that competition for existing houses on the overall market remained stiff last month, as low inventories reduced choices and pushed prices above some buyers’ comfort level.
“The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows,” said Yun.
The expert attributed the boost in existing-home sales to a combination of a strong price appreciation and an improving economy, which “are giving some homeowners the incentive and financial capability to sell and trade up or down.”
Real Gross Domestic Product decreased at an annual rate of 0.2% in the first three months of 2015 but increased 2.4% in the second quarter. NAR’s forecast for the U.S. economy calls for a 2.7% growth in the third quarter.
In the case of the luxury segment, Yun expects it to follow the general market trend.
“It could even outperform it because of the influence of the stock market, which is at a record high,” Yun told Mansion Global.
Yun explained that since many wealthy individuals have sizeable investments in stocks, the upward trend will boost high-earners’ purchasing capacity and their confidence in real estate.
“They will realize that it is not a transitory wealth but a permanent wealth, and that adds confidence to make expensive home purchases,” he said.
This year, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index have all risen to new all-time highs. On Wednesday, markets around the world rose as the Federal Reserve wrapped up its two-day policy meeting keeping its key interest rate near zero.
In order to tame price growth in the overall market and give all buyers more options, “a combination of homebuilders ramping up construction and even more homeowners listing their properties is needed,” warned Yun.
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