For the fifth consecutive month, pending home sales dropped in May—a sign that the recently ended spring buying season didn’t live up to the hype typical for real estate’s traditionally busiest time of year, the National Association of REALTORS® reported Wednesday. Contract signings also eased last month, and a significant sales decline in the South offset gains in other regions of the country.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 0.5 percent in May to a reading of 105.9. The index is down 2.2 percent on an annual basis. NAR Chief Economist Lawrence Yun says this year’s spring buying season will be remembered as one of “unmet expectations,” with pending home sales at the second lowest level in the past year. He says inventory shortage is the main culprit. “REALTORS® in most of the country continue to describe their markets as highly competitive and fast-moving, but without enough new and existing inventory for sale, activity has essentially stalled,” Yun says.
However, buyer demand hasn’t slowed, which is evident in quicker sales and strong price growth, Yun says. The troubling reality is that gains in home prices continue to outpace income growth, housing inventory has fallen for 36 consecutive months, and listings typically go 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,” Yun says. “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.”
