The number of pending home sales fell in May as buyers signed fewer contracts to purchase homes amid a market with an ever tightening supply, particularly in affordable price ranges.
According to the National Association of Realtors (NAR), pending home sales dropped 0.8 percent month to month and is now 1.7 percent lower than May 2016. In a CNBC report, NAR Chief Economist Lawrence Yun said there were hopes that slight gains would be made, but that was likely dashed when April’s reading was revised lower.
“Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales. 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.”
CNBC also reported that the number of home sales that closed this spring was up from the same period a year ago, but the lack of listings clearly held the market back. The supply of homes for sale at the end of May was down more than 8 percent from a year ago, and homes that were listed sold at the fastest rate on record Moreover, the dwindling supply has buyer confidence in the housing market dropping, with a little more than half of renters saying they think now is a good time to buy, according to NAR. That is down from 62 percent one year ago.
According to Yun, the issue is the worst among the most affordable homes, with sales of homes between $100,000 and $250,000 up just 2 percent and sales of homes under $100,000 down 7.2 percent compared to the same period last 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. 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.”
While some current renters may be on the fence about the market, Yun said the percentage of current homeowners who have faith in the market is higher. The problem is, they aren’t moving.
“A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly.”