Pending home sales declined in June, and that might be the first sign that a “turning point for the market” is heading our way. At least, that is what National Association of Realtors (NAR) chief economist Lawrence Yun thinks. He observed this in light of NAR data indicating pending sales of existing homes had fallen nearly 2 percent in June 2021 compared to May 2021, adding, “Pending sales have seesawed since January, indicating a turning point.” Yun said he believes “record-high home prices” are causing would-be buyers to retreat.
Of course, that turning point could be a little way off yet. In May, prices were up nearly 17 percent year-over-year, and actual sales in June were down less than 2 percent compared to the month prior. However, with the number of newly listed homes in June 2021 rising by 5.5 percent more than in June 2020, Yun could be on to something.
Ashley Fahey, Bizjournals real estate editor, agreed with the NAR economist, although she emphasized the market “is still expected to favor sellers for the foreseeable future.” Fahey cited data from Redfin’s Homebuyer Demand Index and information about the number of mortgage applications in June of this year according to the Mortgage Bankers Association (MBA) as additional evidence that homebuying could be tapering off.
Daryl Fairweather, Redfin chief economist, said that prices have finally reached a peak where “buyers are backing off and home sales are starting to get sluggish.” She said that homeowners considering selling are feeling pressured to get their homes listed so they can “sell at the top” because “they feel like this is as good as it gets.”
Fairweather also predicted that areas she referred to as “pandemic-trendy metros” would be the first areas of the country where home prices would level off. A “pandemic-trendy metro” area is one where few people competed to live prior to the pandemic but that experienced a boost in prices and attraction during the pandemic when people were fleeing dense cities. For example, Fairweather said, rural Pennsylvania is likely already past its housing peak.
Joel Kan, associate vice president of economic and industry forecasting at MBA, said he does not expect the housing market to crash when the turning point does arrive. Kan said he expects a “ripple effect” as more homes come back on the market, but added that millennials buying their first homes and ongoing appreciation at lower-priced levels will ultimately support longer-term growth.