Pending home sales dropped slightly in July, marking the fourth decrease in the past five months, according to the latest Pending Home Sales Index report from the National Association of Realtors.

The index, a forward-looking indicator based on contract signings, decreased 0.8% to 109.1 in July. This is down from a downwardly revised 110 in June, and down 1.3% from last year. This marks the third annual decrease in the past four months.

“With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions,” NAR Chief Economist Lawrence Yun said.

“The housing market remains stuck in a holding pattern with little signs of breaking through,” Yun said. “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”

Yun explained the national median home sales price rose 38% over the past five years, however hourly wages increased just 12%. This trend continues to place pressure on affordability in some markets. But NAR’s report showed the slowdown in existing sales since spring is the result of a supply problem and not one of diminished demand.

“Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9% lower than last July,” Yun said.

“The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves,” he said. “This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”

Yun predicted existing home sales will close out the year with 5.49 million, an increase of just 0.7% from 2016.

“The combination of weaker contract signings and the expected pause in activity in the Houston region because of Hurricane Harvey will likely slow overall sales growth in coming months,” Yun said.

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