Year over year, pending home sales were down 22.2%, a larger decrease than the 20.3% annual drop recorded in April.
The NAR’s Pending Home Sales Index fell to a reading of 76.5 in May. An index of 100 is equal to the level of contract activity in 2001.
“Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” Lawrence Yun, the chief economist of NAR, said in a statement. “The lack of housing inventory continues to prevent housing demand from being fully realized.”
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” added Yun. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”
Regionally, on a month-over-month basis, the Midwest (74.4), South (94.4), and West (58.4) all recorded pending home sales fell in May, with the West recording the largest drop at 6.1%. The Northeast (66.7) was the only region to post a monthly increase, rising 12.9% in May. On a yearly basis, all four regions posted declines, with the West posting the largest annual drop at 26.6%.
“Post-pandemic, there was an expectation that we would see a return to housing market seasonality, but it is going to take at least another year before market conditions reflect those more normal patterns,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “The spring market will extend into summer as buyers face limited choices and are waiting for mortgage rates to come down. Market conditions in the Mid-Atlantic remain surprisingly strong, with home prices still rising and homes still selling quickly.”