US pending home sales drop 2.5% in July

US pending home sales unexpectedly fell in June after two consecutive months of gains, according to the latest figures from the National Association of Realtors.

The NAR's monthly index fell 2.5% to 105.6 last month, undershooting expectations for an unchanged reading. Meanwhile, year-over-year contract signings fell 0.3%.

The NAR's chief economist, Lawrence Yun, said: "Super-low mortgage rates have not yet consistently pulled buyers back into the market.

"Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes."

Pending home sales in the Southwest fell 2.4% to an index of 122.7 in July, while sales in the West declined 3.4% 93.5. In the Northeast, sales were down 1.6% to 93.0 and in the Midwest, they were 2.5% lower at 101.0.

Ian Shepherdson, chief US economist at Pantheon Macroeconomics, said the data was disappointing but the trend is still rising.

"The consensus always looked optimistic following June’s 2.8% jump; the pending sales index often mean-reverts after big moves, in either directions. Still, we’re disappointed by this reading, though it does not change our view that the underlying trend in the index is rising. Last year’s hit to the existing homes market, due to the cap on state and local tax deductions, is fading, and mortgage applications are rising.

"We look for a clear increase in home sales across the remainder of the year. In the meantime, the July pending sales index suggests that August existing home sales will dip to about 5.35M from 5.42M."