The National Association of Realtors (NAR) Wednesday morning released its data on pending sales of existing homes for May. The pending home sales index fell 4.2 points (down 3.7%) to 110.8 from a downwardly revised April reading of 115. The May reading is also down 0.2% year over year.
May sales in all four NAR regions fell from a 10-year high posted in April, leading to the first year-over-year decline since August 2014.
The consensus estimate called for a month-over-month decrease of 1% in pending sales. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.
The index has been above 100 (the “average” reading) for 21 straight months.
The NAR’s chief economist noted:
With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity. Realtors® are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market. … Total housing inventory at the end of each month has remarkably decreased year-over-year now for an entire year. There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth.
2016 existing-homes sales are now forecast rise about 3.7% to around 5.44 million, up from a pace of 5.34 million in 2015. The national median existing-home price for all of this year is expected to rise by 4% to 5%. In 2015, existing-home sales rose 6.3% and prices rose 6.8%.
By region, May pending home sales decreased by 5.3 points to an index score of 93 in the Northeast, unchanged from May of 2015. In the South, sales slipped 3.1% to an index score of 126.6, up 0.6% compared with the May 2015 index.
Sales dipped by 3.4% in the West to an index score of 102.6, and are now down 0.1% compared with May 2015. Sales in the Midwest declined by 4.2% to a May index score of 118, now 1.8% lower than May 2015.
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