Here we are again
April marks the second consecutive month that pending home sales were down year-over-year nationally and in all four major regions according to the National Association of Realtors (NAR).
Though there was a glimmer of relief from an increase in contract signings last month in the West region.
Based on last year
The Pending Home Sales Index (PHSI), a future indicator based on contract signings, decreased by 1.3 percent to 109.8 in April from an already downed 111.3 in March.
After last month’s decline, the index is now 3.3 percent below the 2016 index, which is the first year-over-year decline since last December and the largest since June 2014 (7.1 percent).
The PHSI in the Northeast decreased 1.7 percent to 97.2 in April, and is now 0.6 percent below a year ago.
In the Midwest the index fell 4.7 percent to 104.4 in April, and is now 6.1 percent lower than April 2016.
Pending home sales in the South declined 2.7 percent to an index of 125.9 in April and are now 2.3 percent below last April.
The index in the West jumped 5.8 percent in April to 100.0, but is still 4.2 percent below a year ago.
Lack of sales
Lawrence Yun, NAR chief economist, says that contract activity is waning this spring due to the very significant lack of supply levels which are, in turn, discouraging affordability conditions.
“Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market,” he said.
Yun added, “Realtors are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.”
Unfortunately, Yun believes that there is little evidence these consistently low supply levels are going away anytime soon.
Lack of inventory
Yun noted that homebuilding activity has not picked up enough this year and too few homeowners are listing their home for sale.
“Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.”
“The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortages,” said Yun.
He notes that investors aren’t ready to sell but says they should prepare to as “rental demand will soften as the overall population of young adults starts to shrink in roughly five years.”
Yun forecasts existing-home sales to be around 5.64 million this year, an increase of 3.5 percent from 2016 (5.45 million).
The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.