Contract signings remained stalled as buyers wait for new listings in the housing market
Pending home sales remained sluggish in May, hindered by a dearth in housing supply, the National Association of Realtors said Thursday.
The pending home sales index fell to 76.5 in May, down 2.7% month over month and 22.2% lower than a year ago, NAR’s latest report revealed. Consensus forecasts expected pending home sales to remain flat.
NAR chief economist Lawrence Yun noted that the lack of inventory continued to prevent housing demand from being fully realized.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” Yun said. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”
“High hopes that the housing market’s returning to normalcy may be coming down to earth, with May showing a 2.7% decline in pending home sales,” NerdWallet home expert Kate Wood added. “Normally, April to May would see a bump as home buying season really gets underway. One big reason contract signings are stalling? There simply isn’t enough supply. Even as home buyers adjust to the new reality of higher interest rates, their home searches remain stymied by lack of inventory.”
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Ksenia Potapov, economist at First American Financial, agreed. “The spring home-buying season has struggled to gain momentum. Mortgage rates remain high, reducing house-buying power and keeping existing homeowners rate-locked into their homes. As a result, the inventory of homes for sale, which typically increases throughout the spring and summer months, has remained near winter lows.
“The divide between the existing-home and new-home markets continues to grow. While existing-home sales remain muted, multiple leading indicators on the new-home side, including new-home sales, new-home construction, and homebuilder sentiment, have trended higher.”
On the bright side, Potapov highlighted that homebuyer demand and the labor market stayed strong, and potential home buyers are ready to jump in. “While limited inventory is likely to hold back sales activity, the housing market remains resilient,” she said.
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