Pending home sales expanded nationwide in July and reached their second highest reading in over a decade, according to the National Association of Realtors. The continued momentum in pending home sales is a sign there is need for more housing, according to Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.3 percent to 111.3 in July from a downwardly revised 109.9 in June and is now 1.4 percent higher than July 2015 (109.8). The index is now at its second highest reading this year after April (115.0).
The index in the Northeast moved up 0.8 percent to 96.8 in July, and is now 1.1 percent above a year ago. In the Midwest the index decreased 2.9 percent to 105.8 in July, and is now 1.1 percent lower than July 2015. Pending home sales in the South inched higher (0.8 percent) to an index of 123.9 in July and are now 0.4 percent higher than last July.
A sizable jump in the West lifted pending home sales higher in July. The index in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago. In California, pending home sales increased from both the previous month and yearand posted the fourth straight annual increase in July.
"The index in the West last month was the highest in over three years largely because of stronger labor market conditions," said Lawrence Yun, the national Realtor group's chief economist. "If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales."
"Silicon Valley needs more housing," said Karen Trolan, president of the Silicon Valley Association of Realtors. "Because we are fortunate to have so much economic growth in our region with a great deal of employment expansion, we just don't have enough starter housing for people."
Trolan said according to the Silicon Valley Index, 134,000 new Bay Area jobs were created between mid-2014 and mid-2015, yet fewer than 5,000 new homes were constructed last year.
Yun said there are early indications that homebuilders are beginning to shift away from building larger, more expensive homes for the upper end of the market to focusing more on properties geared for buyers in the middle and lower price tiers. "Realtors in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers," said Yun.
Yun added, "The homeownership rate won't move up from its over 50-year low without a meaningful boost from first-time buyers, whose participation has yet to noticeably increase so far this year despite mortgage rates near all-time lows ."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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