Pending home sales modestly decreased in May, marking the fifth consecutive month of annual declines, according to the latest report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined by 0.5 % in May to 105.9, up from 106.4 in April. With May’s decrease, the index is down 2.2%, marking the fifth consecutive month of annual declines.
“Pending home sales underperformed once again in May, declining for the second-straight month and coming in at the second-lowest level over the past year,” NAR Chief Economist Lawrence Yun said.
Yun also said that although a majority of the nation’s Realtors describe their markets as competitive and fast-moving, low inventory is stalling the market.
Although the lackluster spring is largely attributed to low supply, closing data suggests that home price gains continue to outpace income growth. Furthermore, inventory declined on an annual basis for the 36th consecutive month, and listings typically went under contract in just over three weeks, according to Yun.
“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,” Yun added. “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.”
Yun forecasts existing home sales will decrease 5.49 million in 2018, a decrease from 5.51 million in 2017. The national median existing home price, he predicts, will increase about 5% in 2018. For comparison, existing home sales increased 1.1% in 2017 while prices rose 5.7%.
The PHSI in the Northeast increased 2% to 92.4 in May, but is 4.8% lower than 2017. The Midwest index increased by 2.9% at 101.4, but is still 2.5% lower than this time last year.
Lastly, pending home sales in the South declined 3.5% to a 122.9, remaining unchanged from 2017. The index in the West modestly increased 0.6% to 94.7 and is 4.1% below 2017.