Perhaps the rising mortgage rates have finally caught up to the housing sector, as the number of pending home sales has decreased slightly in June.
While mortgage records show changing prices for many homes, the national rates have dropped slightly in recent weeks. Despite this, the overall increase over the past several months appears to have finally taken a toll on total sales.
Recently, The National Association of Realtors released its Pending Home Sales Index, which uses contract signings to predict the future state of the market. Overall, the data illustrated a small decrease in sales for June, now at 110.9 percent, compared to May's 111.3 percent. During the past few months, the numbers were frequently higher than from a year ago, and this recent month marks the first time in a while that sales have shifted downward.
The most likely factor is the mortgage rate, as many economists contribute that to a reduction of buyer activity, while supply and demand may also have played a part.
"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," said Lawrence Yun, chief economist for NAR. "The persistent lack of inventory also is contributing to lower contract signings."
There is a plus side, though, as the PHSI is still higher now than it was in 2012, and even with the dip the housing market is recovering as a whole.
Yun added that closed sales may still decline in the coming months, but when compared to previous conditions the remainder of 2013 should still be positive.
The future of mortgage rates
Financial regulators contribute greatly to residential financing, and what to conditions to expect can be changed swiftly. Monthly statements by Ben Bernanke, Chairman of the Federal Reserve often shift public sentiment and real estate activity.
Many elements also effect the housing segment - for example, median home prices have lessened from May to June, and that change has resulted in a lower monthly mortgage payment for June, even with with rising rates, according to HSH Market Trends. This point of view has home affordability better last month than the month before.
In addition to the PHSI, the next Fed meeting could alter the direction of mortgage rates. Unemployment and consumer confidence reports released at the end of July may also provide prospective, added Dan Green, author of The Mortgage Reports.
Given the uncertainty, it may benefit a buyer to lock in on rates before they might change. A floating mortgage rate may prevent some home sales from closing, contributing to the lower totals for June, the NAR added.