May Pending Home Sales Down Nearly 4%

The National Association of Realtors said pending home sales fell in May, the first drop in three months, and fell year over year for the first time in nearly two years.

The NAR Pending Home Sales Index fell by 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 percent) from a year ago (111.0). Despite the decline, the index reading is still the third-highest in the past year, but declined year-over-year for the first time since August 2014.

Pending home sales fell in all regions. The Northeast saw a 5.3 percent drop to 93.0 in May and was now unchanged from a year ago. In the Midwest the index slipped by 4.2 percent to 108.0 and by 1.8 percent from a year ago. The South declined by 3.1 percent to 126.6 but was 0.6 percent higher than a year ago. The West decreased by 3.4 percent to 102.6 and by 0.1 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the May pullback was hardly unexpected given the huge spike in April. “April’s spike was likely due to this year’s early Easter, which allowed one more weekend to sign contracts in April,” he said.

Vitner said despite May’s decline, the pending home sales index remains at a healthy level, with pending sales up 2.4 percent over the past year. “The housing market still has strong forward momentum. Prospective buyer traffic rebounded in June and mortgage rates have fallen back near their all-time lows.”

NAR Chief Economist Lawrence Yun suggested realtors are complaining with increasing frequency that buyers “continue to be frustrated by the tense competition and lack of affordable homes for sale in their market. “There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth,” he said.