After two straight months of modest increases, pending home sales dipped in April to their third-lowest level over the past year, according to the National Association of Realtors (NAR). All major regions saw no gain in contract activity last month.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, declined 1.3% to 106.4 in April from an upwardly revised 107.8 in March. With last month’s decrease, the index is down on an annualized basis (2.1%) for the fourth straight month, says NAR.
Lawrence Yun, NAR chief economist, says the housing market this spring is hindered because of the severe housing shortages in much of the country.
“Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out,” he explains. “Feedback from Realtors, as well as the underlying sales data, reveals that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher.”
He adds, “The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”
Heading into the summer months, if low supply and swift price growth were not enough of a headwind for the housing market, Yun believes that rising mortgage rates and gas prices could lead to hesitation among some would-be buyers.
“The combination of paying extra at the pump while also needing to save more for a down payment because of higher rates and home prices may weigh on the psyche of those looking to buy,” he continues. “For now, the economy is very healthy, job growth is holding steady and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.”
Yun still forecasts for existing-home sales in 2018 to increase 0.5% to 5.54 million – up from 5.51 million in 2017. The national median existing-home price is expected to increase around 5.1%. In 2017, existing sales increased 1.1%, and prices rose 5.7%, says NAR.
The PHSI in the Northeast remained at 90.6 in April and is 2.1% below the level from a year ago. In the Midwest, the index decreased 3.2% to 98.5 in April and is 5.1% lower than it was in April 2017.
Pending home sales in the South declined 1.0% to an index of 127.3 in April, which is still 2.7% higher than last April. The index in the West inched backward 0.4% in April to 94.4 and is 4.6% below that of a year ago.
