Ongoing inventory shortages are propelling home prices higher, causing pending home sales to slump for the third consecutive month, the National Association of REALTORS® reported Wednesday. None of the major regions of the U.S. saw an increase in contract activity in May.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 0.8 percent to a reading of 108.5 in May. The index is 1.7 percent below a year ago.
“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, NAR’s chief economist. “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 lower price ranges of the housing market are seeing the most persistent housing shortages, Yun says. Sales of homes under $100,000 last month plunged 7.2 percent year-over-year. Sales are up only 2 percent for homes priced between $100,000 and $250,000.
“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,” Yun says. “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. … 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.”
Source: National Association of REALTORS®
