May pending sales report adds to positive summer housing forecasts

by Andrew Morrell

Less than a week after the National Association of Realtors reported stronger than expected existing-home sales for the month of May, there’s more good news for the U.S. housing market. NAR’s Pending Home Sales Index for May came in 1.1 percent above the previous month, rising to 105.4. That figure was also only 0.7 percent below where the index stood one year ago.

While this marks the 17th consecutive month in which pending home sales have fallen year-over-year, month-to-month growth in this leading indicator is a positive sign for the housing market in the months to come, particularly after NAR’s existing-home sales report for May beat expectations. It also adds more evidence to the argument that falling mortgage rates will stimulate demand coming off a weak start to the year and a pronounced slowdown in sales that began in the second half of 2018.

“Rates of 4 percent and, in some cases even lower, create extremely attractive conditions for consumers,” NAR Chief Economist Lawrence Yun said in a news release. “Buyers, for good reason, are anxious to purchase and lock in at these rates.”

But buyers may also be frustrated that they can’t find a home at an affordable price. Yun and other housing economists continue to cite a shortage of inventory at middle- and lower-tier price points as the primary limit to sales growth. A report also released June 27 by Attom Data Solutions found that across the 480 most populous counties in the nation, two-thirds of available home listings were beyond the standard definition of affordability (housing costs are considered to be unaffordable if they exceed 30 percent of annual household income).

“Home builders have not ramped up construction to the extent that is needed,” Yun said. “Homes are selling swiftly, and more construction will help keep home prices manageable and thereby allow more middle-class families to attain ownership opportunities.”