National Association of Realtors economist Lawrence Yun

WASHINGTON, DC—You can't buy what isn't available. A self-evident statement, but it underscores the dilemma facing would-be homebuyers and helps to explain why pending home sales declined in May for the third consecutive month. The National Association of Realtors said Wednesday that no region of the US saw an increase in contract activity last month.

NAR's Pending Home Sales Index, based on contract signings, decreased 0.8% to 108.5 in May from a downwardly revised 109.4 in April. The index is now 1.7% lower than a year ago, marking the second straight annual decline and the most recent since November and December of 2016.

“Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales,” says Lawrence Yun, chief economist with NAR. “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.”

Yun's observations dovetail with comments from David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in announcing the latest S&P CoreLogic Case-Shiller Indices on Tuesday. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up,” Blitzer said.

Another factor may be weaker financial and economic confidence, NAR says. The association released its quarterly Housing Opportunities and Market Experience survey earlier this week, reporting that fewer renters think that now is a good time to buy a home. Overall, survey respondents expressed less confidence about the economy and their financial situation than earlier this year.

The decline in pending home sales in May offset the positive news NAR issued last week, when it said that existing-home sales, including for-sale apartments, rebounded last month after declining in April. However, Meyers Research on Wednesday said that sales in new home communities reached 2.23 nationally for the second quarter, up 4.2% compared to Q1.

The gains were especially pronounced in markets with high concentrations of tech jobs, according to Meyers Research. In the San Jose metro area, for instance, sales in single-family home projects were up 8.4% from the previous quarter.

Instant Insights /

Lack of Supply Stymies Pending Home Sales

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