Pending home sales fall in the US for second month in a row

Pending home sales in the United States fell in April for the second consecutive month and were down year on year nationally and in all four major regions, the latest data shows.

Only the West saw an increase in sales, according to the index from the National Association of Realtors (NAR) and it is down 3.3% compared to a year ago, the first year on year fall since December 2016 and the largest since June 2014 when it was down 7.1%.

The index in the Northeast decreased 1.7% and is now 0.6% below a year ago, in the Midwest it fell 4.7% and is 6.1% lower than April 2016, in the South it fell 2.7% and is 2.3% down year on year and in the West it increased 5.8% but is still 4.2% below a year ago.

According to Lawrence Yun, NAR chief economist, activity is slowing because of significantly weak supply levels which are spurring deteriorating affordability conditions.

‘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,’ he explained and added that estate agents are indicating that foot traffic is higher than a year ago but it’s obviously not translating to more sales.

He also pointed out that 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.

Unfortunately, Yun believes there is little evidence these astoundingly low supply levels are going away soon. Home building activity has not picked up enough this year and too few home owners are listing their home for sale.

‘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,’ said Yun.

‘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 explained.

Yun forecasts existing home sales to be around 5.64 million this year, an increase of 3.5% from 2016 and the national median existing home price this year is expected to increase around 5%. In 2016 existing sales increased 3.8% and prices rose 5.1%.