Pending home sales decreased annually in March, and are showing no signs of improvement as housing inventory fails to keep up with homebuyer demand, according to the latest report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased by 0.4% in March to 107.6, up from 107.2 in February. However, this was down 3% from March 2017, marking the third consecutive month of annual declines.
“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” NAR Chief Economist Lawrence Yun said.
“Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand,” Yun said. “What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy.”
Yun also pointed out that the multiple winter storms and unreasonable cold weather also helped contribute to the decrease in contract signings in the Northeast.
NAR is still unsure if home sales will be able to surpass last year’s levels, but says affordability will play a major role. As the home-buying market prepares to reach its peak months, price appreciation continues to outpace incomes. The association also pointed out that the recent uptick in mortgage rates to a more-than-four-year high only adds to budget constraints for aspiring homebuyers.
“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” Yun said. “That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth.”
“Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers, especially first-time buyers, will be left on the sidelines,” he said.
Yun forecasts existing home sales will come in around 5.51 million in 2018, unchanged from 2017. The national median existing-home price, he predicts, will increase about 4.4% in 2018. For comparison, existing home sales increased 1.1% in 2017 while prices rose 5.8%.