Fewer Americans than forecast signed contracts to buy previously owned homes in June, a sign residential real estate is struggling to strengthen.
The index of pending home sales declined 1.1 percent from the month before after rising 6 percent in May, figures from the National Association of Realtors showed today in Washington. The median forecast of 39 economists surveyed by Bloomberg projected sales would rise 0.5 percent.
Limited availability of credit and sluggish wage growth are making it harder for prospective buyers to take the plunge, threatening to throttle the pace of the housing recovery. Continued gains in employment and a bigger supply of available homes will be needed to help accelerate the industry’s progress, while increases in home prices may encourage more Americans to put their properties up for sale.
“Housing is a significant question mark, while many other sectors of the economy seem to be performing adequately,” Louis Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said before the report. There are a variety of reasons behind the sluggish growth in the industry, “ranging from credit availability to finances to just general attitudes about housing.”
Stocks dropped as industrial shares sank and investors watched crises overseas before a Federal Reserve policy decision this week. The Standard & Poor’s 500 Index fell 0.3 percent to 1,971.9 at 10:01 a.m. in New York. The S&P 500 Homebuilding Index declined 1 percent.
Estimates in the Bloomberg survey of economists ranged from a decline of 3.1 percent to an increase of 3.5 percent. The May reading was revised from a previously reported 6.1 percent gain.
Purchases were down 4.5 percent from the year prior, on an unadjusted basis, after a 6.9 percent decrease in the 12 months that ended in May, the association reported.
The pending home sales index was 102.7 on a seasonally- adjusted basis. A reading of 100 corresponds with the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.
“Supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates,” the group’s chief economist Lawrence Yun said in a statement.
Two of four regions showed a decrease in contract signings from a month earlier, led by a 2.9 percent drop in the Northeast. Contract signings fell 2.4 percent in the South, rose 0.2 percent in the West and climbed 1.1 percent in the Midwest.