Pending home sales edged down with near-term sales expected to be notably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit, according to the National Association of REALTORS®.

The Pending Home Sales Index declined 2.6% based on contracts signed in June and was 18.6% below June 2009. The data reflect contracts and not closings, which normally occur with a lag time of one or two months. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

NAR Chief Economist Lawrence Yun said lower home sales are expected in the short term. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” he said. “Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”

Yun expects mortgage interest rates to remain historically low for the balance of the year, with very modest growth in employment. “We really need to see stronger job creation to have a meaningful recovery in the housing markets,” he added.

The PHSI in the Northeast dropped 12.2%  in June and was 25.4% lower than June 2009. In the Midwest, the index fell 9.5% and was 27.8% lower than a year ago. Pending home sales in the South rose 3.7% in June, but were 13.3% below June 2009. In the West, the index slipped 0.2% and was 14.2% below a year ago.

Source: NAR