Pending Homes Sales Post 5th Consecutive Annualized Decrease

Pending home sales fell in May, albeit slightly, marking the fifth consecutive annualized decrease, the National Association of Realtors reported yesterday.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased by 0.5 percent to 105.9 in May from 106.4 in April, the second consecutive monthly decline. From a year ago, contract signings fell by 2.2 percent.

Regionally, a decline in the South offset gains in the Northeast, Midwest and West. The South reported a 3.5 percent decline to 122.9 in May from April (unchanged from a year ago). The West saw an 0.6 percent increase to 94.7, but fell by 4.1 percent from a year ago. The Northeast increased by 2.0 percent to 92.4 in May but fell by nearly 5 percent from a year ago. In the Midwest, the index rose by nearly 3 percent to 101.4, but fell by 2.5 percent from a year ago.

“Pending sales continue to be held back by severe inventory shortages,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Fewer existing homes on the market are also boosting new home sales, which are trending higher this year.”

NAR Chief Economist Lawrence Yun said this year’s spring buying season will go down as one of unmet expectations. “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,” he said.

Yun added 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. 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. 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.”