Pending homes sales in US down again in May, to second lowest level for a year
Pending home sales in the United States decreased slightly in May and have now fallen on an annualized basis for the fifth straight month, according to the latest index report.
Overall a larger decline in contract activity in the South offset gains in the Northeast, Midwest and West, according to the figures from the National Association of Realtors (NAR).
This means that contract sales in May were at their second lowest level over the last 12 months, effectively stalling the housing market as there are not enough homes for sale to meet demand, according to NAR chief economist Lawrence Yun.
‘If the recent slowdown in activity were because buyer interest is waning, price growth would start slowing, inventory would begin rising and homes would stay on the market longer. Instead, the underlying closing data in May showed that home price gains are still outpacing income growth,’ he explained.
Overall inventory declined on an annual basis for the 36th consecutive month, and listings typically went under contract in just over three weeks.
‘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 pointed out.
‘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,’ he added.
Yun now forecasts that home sales in 2018 are likely to fall by 0.4% to 5.49 million, down from 5.51 million in 2017. The national median price is expected to increase around 5%. In 2017 sales increased 1.1% and prices rose 5.7%.
A breakdown of the figures show that pending sales increased 2% in the Northeast but are still 4.8% below a year ago while in the Midwest they rose 2.9% and are 2.5% lower than May 2017.
Pending home sales in the South declined 3.5%, unchanged from a year ago, and pending sales inched upward by 0.6% but are 4.1% below a year ago.