Pending Home Sales Fell 0.8% in May

Washington, DC, June 28, 2017-The Pending Home Sales Index decreased 0.8% to 108.5 in May from a downwardly revised 109.4 in April. The index is now 1.7% below a year ago, which marks the second straight annual decline and the most recent since November and December of last year.

Lawrence Yun, NAR chief economist, says it's clear the critically low inventory levels in much of the country somewhat sidetracked the housing market this spring. "Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales," he said. "Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast."

The persistent housing shortages seen in several markets are most severe, according to Yun, in the lower price ranges. That's very apparent when looking at the percent change in closings in May compared to a year ago. Sales of homes under $100,000 last month were down 7.2% from last year and up only 2.0% for those between $100,000 and $250,000. In higher price brackets, sales expanded incrementally all the way up to massive increases of 26.0% for homes priced between $750,000 and $1 million and even more for those $1 million and up (29.1%).

Weaker financial and economic confidence could also be playing a role in the slowdown in contract activity. NAR's quarterly Housing Opportunities and Market Experience (HOME) survey, released earlier this week, found that fewer renters think it's a good time to buy a home, and respondents overall are less confident about the economy and their financial situation than earlier this year.

"The lack of listings in the affordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity," said Yun. "Meanwhile, many prospective first-time buyers can't catch a break. Prices are going up and there's intense competition for the homes they're financially able to purchase."