Pending home sales dropped 0.5 percent month-over-month and remain down on an annualized basis for the fifth straight month, according to the latest National Association of Realtors (NAR) Pending Home Sales Index (PHSI), released on Wednesday. PHSI tracks home sales in which a contract is signed but the sale has not yet closed.
“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,” Lawrence Yun, NAR’s chief economist said. “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.”
Yun said the “lackluster spring,” has mostly been because of the low inventory issues that continue to plague the real estate market. Inventory declined on an annual bases for the 36th consecutive month and listings typically went under contract in just over three weeks.
“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,” Yun said. “One encouraging sign has been the increase in new home construction to a 10-year high.”
“Several would-be buyers this spring were kept out of the market because of supply and affordability constraints,” he added. “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.”
A larger decline in the south – where pending home sales fell 3.5 percent – offset modest gains in the northeast, midwest and west, which saw gains of 2.0 percent, 2.9 percent and 0.6 percent month-over-month, respectively.