Appraisals and ValuationsReal Estate

Pending home sales see largest drop since 2014

Drop for second consecutive month

Pending home sales shrank in April for the second consecutive month, and were down annually in all four major regions, according to the latest report from the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 1.3% to 109.8 in April, down from a downwardly revised 111.3 in March. This marks a decrease of 3.3% from last year, marking the first annual decline since December and the largest decline since June 2014.

“Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market,” NAR Chief Economist Lawrence Yun said. “Realtors are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.”

“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,” Yun said.

And these low levels of supply don’t look like they’ll increase anytime soon, according to the report. Homebuilding has yet to pick up significantly, and very few homeowners are putting their house on the market.

“The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortages,” Yun said. “To date, there are no indications investors are ready to sell.”

“However, they should be mindful of the fact that rental demand will soften as the overall population of young adults starts to shrink in roughly five years,” he said.

Existing home sales should come in at 5.64 million in 2017, an increase of 3.5% from 2016, NAR forecasts. The national median existing home price is expected to increase about 5% from last year.

But even as inventory continues to shrink, buyer demand continues to grow. Disappearing bankruptcies could soon send a new wave of homebuyers into the market.

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