An index of home purchase contracts fell 2.6% in June from May as the expiration of federal tax incentives for buyers continued to damp demand from home shoppers for a second straight month, according to the National Assn. of Realtors.
The trade group's pending home sales index, a forward-looking indicator based on contracts signed for previously owned homes, fell to 75.7 in June from an upwardly revised 77.7 in May, the group said Tuesday. The index stood at 93 in June 2009.
"If you're looking for a pulse in the U.S. housing market, best of luck. I can't seem to find one," Michael D. Larson, a housing and interest rate analyst at Weiss Research, wrote in a note to investors Tuesday. "What's remarkable about the weakness is that it's coming at a time where mortgage rates are hovering around 4.5%."
An index of 100 is equal to the average level of contract activity during 2001, which was both the first year that the group began tracking the data as well as the first of five straight years of increases for sales of previously owned homes.
The month-to-month declines in the index follow the April 30 expiration of a federal tax credit of up to $8,000 that had fueled sales earlier this year. Several economists predict that growth in home sales will require the jobs market to improve.
Lawrence Yun, chief economist for the Realtors group, has said he expects most of the summer to be sluggish given that many buyers had already been motivated by the expiring tax credits.
"There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve," Yun said.