WASHINGTON - The number of signed contracts to buy homes fell in June, as limited supplies of homes on the market are holding back possible sales growth.
The National Association of Realtors said Wednesday that its seasonally adjusted pending home sales index declined 1.8 percent to 110.3 last month. Still, strong demand from would-be buyers has pushed the index up 8.2 percent during the past 12 months.
"We could see a bit of a slowing in the recent upward trend in existing home sales in the coming months," said Derek Lindsey, an analyst at the bank BNP Paribas.
Solid hiring and relatively low mortgage rates have fueled the previous five months of gains in the pending sales index. But buying options are increasingly limited because the market contains just five months' supply of homes, compared to the historical average of six months in a healthier 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 decline indicates that sales may soon be peaking after steady growth for much of the year.
Completed sales of existing homes climbed 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million, the highest rate since February 2007, the Realtors said last week. These sales have climbed 9.6 percent over the past 12 months, although the number of existing homes available to buy have edged up a slim 0.4 percent.
The result of strong demand and limited supplies are price increases that can eventually hurt affordability and cause would-be buyers to pull back from the market.
The median home price has risen 6.5 percent over the past year to $236,400, the highest level -- unadjusted for inflation -- ever reported by the Realtors.
Much of that demand has stemmed from an accelerated pace of hiring that dates back to early 2014. Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. Those new jobs have filled the economy with new paychecks that stirred more interest in home-buying.
"The lack of historical participation of the first time household will remain as the main factor in the mixed recovery in the single family market. At some point that will change when home price gains slow further and rents rise faster but we're not at that point yet," said Peter Boockvar, chief market analyst at The Lindsey Group.
Low but rising mortgage rates also increased buyer demand.
The average 30-year fixed mortgage rate was 4.04 percent last week, according to mortgage firm Freddie Mac. The rate remains roughly two percentage points below the historical average, but it also represents a sharp increase from the 52-week low of 3.59 percent.