US Pending Home Sales Falter
Housing demand unexpectedly weakened for a second month across most U.S. regions as lean inventory took a toll on affordability, putting a damper on the typically busier spring selling season, according to National Association of Realtors figures released May 31.
Highlights of Pending Home Sales
• Pending home sales index fell 1.3% (forecast was 0.5% advance) after 0.9% drop.
• Index decreased 5.4% from April 2016 on an unadjusted basis.
• Three of four regions showed monthly declines.
Key Takeaways
The back-to-back declines in contract signings were the first since May and June of last year and underscore how limited choices of properties are impinging on the market’s progress by boosting prices and creating affordability issues.
At the same time, the fundamentals for housing remain solid for those with the wherewithal to pay higher asking prices. Mortgage rates have retraced much of their post-election rise, declining in the week ended May 25 to the lowest since mid-November. Also, steady job growth and gradual, if unimpressive, wage gains are helping.
Economist Views
“Prospective buyers are feeling the double whammy this spring of inventory that’s down 9% from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income,” NAR Chief Economist Lawrence Yun said in a statement.
Other Details
• Purchase contracts decreased 4.7% in the Midwest, 2.7% in the South and 1.7% in the Northeast; signings in the West advanced 5.8%.
• The year-over-year decline was the largest since a 9.1% drop in August 2014.
• NAR economist Yun says little evidence low supply levels will dissipate quickly.
• Yun projects 5.64 million previously owned homes will sell this year, up 3.5% from 2016.
