The Pending Home Sales Index ticked up in July to a seasonally adjusted reading of 111.3, a 1.3% increase from the downwardly revised index of 109.9 in June and a 1.4% increase year-over-year, according to a Wednesday release from the National Association of Realtors (NAR).
July’s result is the second-highest score seen in the past 12 months, falling four points below than the highest reading of 115 seen in April. The pending home sales index, based on signed real estate contracts for existing single-family homes, is a key tool to measure the housing contract activity and to predict future existing home sales in one or two months ahead.
July's result is driven primarily by big gains posted in the West region, which saw a 7.3% increase month-over-month to 108.7, marking a 6.2% increase from a year prior. The only region to see pending home sales went decrease was the Midwest, falling -2.9% from June to 105.8, and marking a -1.1% decrease year-over-year.
“The index in the West last month was the highest in over three years largely because of stronger labor market conditions,” said NAR chief economist Lawrence Yun in a statement. "If home building increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales.”
Despite the fact that tight inventory and tightening affordability have plagued most buyers the entire summer, Yun reports that contract activity was able to pick up "at least modestly" in many areas during July.
“More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale," Yun said. "There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”
Judging from the current pace, Yun expects existing sales this year to surpass last year's levels by 2.8%, and reach a 5.38 million in 2016.
Read the full release from NAR or watch their video below for highlights of the July data.