Pending home sales fall slightly in July

• Pending home sales slip in July as interest rates rise
• West and Northeast see biggest impact
• South and West see no slowing

Signed contracts to buy homes fell in July as higher mortgage interest rates slowed the market, according to the National Association of Realtors.

The pending home sales index declined declined 1.3% in July from June, but was 6.7% above year earlier levels, the association said Wednesday.

"The modest decline in sales is not yet concerning," says Lawrence Yun, NAR chief economist, noting an uneven pattern around the country.

The South and Midwest show no measurable slowdown. Higher mortgage interest rates and rising home prices are impacting activity in the Northeast and the West, he says.

"More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems," he says.

Pending home sales, which indicate the rate of closings a month or two later, dipped in June as higher interest rates started to weigh on buyers.

The July decline was expected, given higher interest rates, but the drop "was quite small," says Jed Kolko, Trulia economist.

While other housing data hint at rising rates' impact on demand, the July pending home sale index may be the best indication so far because mortgage rates made their big move up in May.

The average rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.8% for the week ended Friday, the Mortgage Bankers Association said Wednesday. That's the highest rate since April 2011.

Looser credit and more housing inventory could be encouraging more home sales, offsetting some of the dampening effect of rising rates, Kolko says.

The pending sales data follow other reports showing a slowdown in the pace of the housing recovery.

The Standard & Poor's/Case-Shiller data for June, released Tuesday, showed home prices up a robust 12.1% year over year but price gains slowed in recent months.

But from May, Case-Shiller's 20-city index showed prices were up 0.9% on a seasonally adjusted basis, about half as much as in March. Still, a monthly gain of almost 1% is larger than historical norms.

New home sales, meanwhile, fell 13.5% in July from June to a nine month slow. Single family housing starts in July were down 2.2% from June.

NAR says pending home sales fell 6.5% in the Northeast from June, but were 3.3% higher than a year ago. In the West, where home prices have rebounded the most strongly, pending sales fell 4.9% in the month to just below year earlier levels.

In the Midwest, the index slipped 1% but is still a strong 14.5% above year earlier levels. Pending home sales in the South rose 2.6% in July to be 7.7% higher than a year ago.

Separately, the MBA said mortgage applications decreased 2.5% for the week ending Aug. 23 from one week earlier. The refinance index dropped 5% while the purchase index increased 2%.