5 straight months of falling pending home sales
According to the National Association of Realtors, the Pending Home Sales Index fell a meager 0.5% in May to 105.9, down from 106.4 in April, representing the fifth month of consecutive decline.
Of note is the news that the decline was caused by lower contract signings in the south. Given that the south led the way in new construction home sales last month, it would seem builders are pulling buyers away from existing home sales. “Pending home sales underperformed once again in May,” said Lawrence Yun, NAR chief economist. He said this is the second lowest level over the past year.
Of course, inventory is to blame. Most realtors say their markets are fast moving, but without enough inventory to satisfy buyer demand sales are stalling. Homes across the country are selling in less than 30 days and prices are still rising, which speaks to an inventory issue and not a demand issue.
“One encouraging sign has been the increase in new home construction to a 10- year high,” said Yun. This year, he expects existing home sales to come in lower than last year, forecasting 5.49 million in total home sales over the 5.51 million in 2017.
Regional Pending Home Sales
- In the Northeast, pending home sales rose 2% to 92.4 in May—that’s nearly 5% below a year ago.
- In the Midwest, the index rose nearly 3% to 101.4 but is still 2.5% below its May 2017 level.
- In the West, pending home sales inched up 0.6% to 94.7, about 4% lower than last year.
- In the South, pending home sales declined 3.5% to an index of 122.9.
The Pending Home Sales Index is a leading housing indicator deemed reliable by market analysts. The index projects closings within the next 60 days by tracking when a ‘For Sale’ home changes to pending status (when it’s considered as good as closed).
An index of 100 is equal to the average level of contract activity in 2001, the first year the index was created. In that year, the volume of existing-home sales was within the 5 million to 5.5 million range, which is considered normal.