For the fifth straight month, pending home sales have fallen, down 2.2 percent from last year, according to the National Association of Realtors (NAR).
Pending home sales in May decreased 0.5 percent to 105.9 from 106.4 last month. The reason this year’s spring season has fallen short of its expectations is due to a low supply of housing rather than a lack of demand. This is evident in the fact that home prices are still on the rise, outpacing incomes, and inventory has been declining for 36 consecutive months. In the South, pending home sales fell 3.5 percent compared to April to an index of 122.9 in May, but still saw no change since last year.
“Pending home sales underperformed once again in May, declining for the second straight month and coming in at the second lowest level over the past year,” noted Lawrence Yun, NAR chief economist. “Realtors in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled.”
Though pending sales are declining, good news is in store for buyers as the peak summer sales season quickly approaches. A change in the market is on the way as construction is at its highest level in over a decade and continues to rise. In today’s healthy economy and job market, potential buyers will reap the benefits of increased inventory in years to come.
“With the cost of buying a home getting more expensive, it’s clear the summer months will be a true test for the housing market. One encouraging sign has been the increase in new home construction to a 10-year high,” noted Yun. “Several would-be buyers this spring were kept out of the market because of supply and affordability constraints. The healthy economy and job market should keep many of them actively looking to buy, and any rise in inventory would certainly help them find a home.”
Yun predicts that existing-home sales in 2018 will decrease 0.4 percent to 5.49 million, down from 5.51 million in 2017. But, home sales will likely continue to increase roughly 5 percent.