Pending Home Sales Index Falls in July

WASHINGTON—The number of Americans signing contracts to buy previously owned homes fell in July for the second consecutive month, the latest sign that higher mortgage rates are starting to drag down the housing recovery.

The National Association of Realtors said Wednesday that its seasonally adjusted index for pending sales of existing homes fell to 109.5 in July, 1.3% lower than the June reading and a slightly steeper decline than the 1% drop forecast by economists. The July index was 6.7% higher than its level a year earlier.

Because of the way pending home sales are tallied—at the signing of a contract, rather than at the closing—they provide a more up-to-date reading on housing market conditions than some other indicators. July’s data likely reflected the continued rise in mortgage rates.

According to data from Freddie Mac, the average 30-year fixed-rate mortgage rose 0.3 percentage point to 4.37% in July from June. As of last week, it stood at 4.58%, a two-year high.

Aug. 29, 2013, 8:54 a.m. EDT

Nearly half of homes are purchased in cash

The real-estate recovery is being driven by all-cash buyers

By Quentin Fottrell

More Americans are buying homes in all-cash deals, according to several recent studies. But real- estate experts say this increase may not be a good sign for the health of the housing market.

All-cash purchases accounted for 40% of all sales of residential property in July 2013, up from 35% during the previous month and 31% in July 2012, according to data from real-estate data firm RealtyTrac released Thursday. That’s the second highest rate since the survey began in January 2011 – second only to 53% in March 2012.

Another report by Goldman Sachs last week was even more strongly in the cash-is-king camp, estimating that cash sales now accounted for 57% of all residential home sales versus 19% in 2005. Walt Molony, a spokesman for the National Association of Realtors, says that the association’s estimates of the share of the market made up by all-cash buyers are lower than the others, at 31% in July, but that they’re still at an all-time high.

The cities with the biggest month-over-month jumps in the number of all-cash sales, according to RealtyTrac included Dallas (up 82%), St. Louis (up 66%), Los Angeles (up 32%), plus Seattle and Phoenix (an increase of 21%, respectively). This helped boost overall sales of U.S. residential properties, which sold at an annualized pace of 5.5 million in July 2013, a 4% increase from the previous month and a rise of 11% from a year ago.

While cash buys help explain the surge in home sales over the last year, some experts say it’s an unsustainable trend – and one that should be greeted with caution. “The rise in cash sales is not a good long-term trend for the housing market,” says Daren Blomquist, vice president at RealtyTrac. Although RealtyTrac doesn’t identify who has cash-in-hand, experts say wealthy Americans and downsizing retirees account for some of these all-cash deals. Investors who are keen to make a profit by buying low and renting those properties – or flipping them – also drive up the number of all-cash deals, he says. None of these three groups – flippers, retirees and the wealthy – are big enough to sustain the market in the long run, he says. If it remains dominant in the long run, cash buying “will have a chilling effect on home sales and prices,” Blomquist says.

http://www.marketwatch.com/story/nearly-half-of-all-homes-are-purchased-in-cash-2013-08-29/print?guid=7AB7E786-1097-11E3-B648-002128040CF6

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