Pending home sales in the United States inched higher for the second month in a row in March, but unrelenting inventory constraints once again kept overall activity below where it was a year ago, the latest data shows.
The pending home sales index from the National Association of Realtors (NAR) nudged up by 0.4% last month but it is still 3% below where it was in March 2017 and is down on an annual basis for the third consecutive month.
According to Lawrence Yun, NAR chief economist, said that contract activity is moving sideways and not breaking higher despite the strong job creating economy. ‘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,’ he explained.
‘Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand. What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy,’ he pointed out.
Looking ahead to the upcoming peak months for home sales, Yun believes that affordability will be a significant topic of discussion and driving factor of if overall activity can break out above year ago levels.
Price appreciation in most markets continues to outpace incomes and Yun said that the recent uptick in mortgage rates to over a four year high only adds to the budget constraints aspiring buyers are feeling at present.
‘Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive. 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 side lines,’ Yun added.
Yun forecasts for existing home sales in 2018 to be around 5.61 million, up from 5.51 million in 2017. The national median existing home price is expected to increase around 4.4%. In 2017 existing sales increased 1.1% and prices rose 5.8%.
A breakdown of the figures show that sales fell by 5.6% in the Northeast and are now 8.1% below a year ago while in the Midwest sales increase 2.4% but are 6% lower than March 2017.
Pending home sales in the South climbed 2.5% and are 0.3% higher than last March while in the West sales fell by 1.1% and are now 2.2% below a year ago.
