A pending sale sign is seen in front of a home on August 21, 2015 in Miami, Florida.Joe Raedle/Getty Images
Slightly more Americans signed contracts to buy homes in July, as pending sales edged up after dipping in June.
The National Association of Realtors said Thursday that its seasonally adjusted pending home sales index rose 0.5 per cent to 110.9 last month. This marks a slight recovery from June, when the index fell to 110.4 after reaching 112.3 in May, a level last seen in 2006.
Steady job growth coupled with low mortgage rates has improved home sales this year. As the recovery from the Great Recession enters its seventh year, more Americans have rebuilt their savings, increased their home equity and returned to the real estate market.
Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.
The modest increase in the index last month indicates that sales may soon be peaking after surging this year.
Completed sales of existing homes increased 2 per cent in July to a seasonally adjusted annual rate of 5.59 million, the fastest pace in eight-and-a-half years, the Realtors said last week. But the market has also revealed a mismatch between rising demand and limited supplies of homes on the market. Sales have increased 9.6 per cent over the past 12 months, while the number of listings has declined 4.7 per cent.
The higher demand has largely emerged out of solid hiring since early 2014 and relatively low mortgage rates.
Over the past 12 months, employers have added 2.9 million jobs as the unemployment rate has fallen to 5.3 per cent from 6.2 per cent. The hiring has generated a greater sense of financial security that has boosted housing.
Mortgage rates have also remained roughly two percentage points below their historic levels.
The average 30-year fixed mortgage rate was 3.84 per cent this week, according to mortgage firm Freddie Mac.