Pending Home Sales Fall Again on Inventory Dry Spell

Aug. 31, 2017

Pending home sales fell again in July, marking the fourth time in five months as serious inventory problems throughout the country stall contract activity, with only the West seeing an increase, according to the National Association of Realtors (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 0.8% to 109.1 in July from a downwardly revised 110.0 in June, the NAR said in a press release. The index is down 1.3% from a year ago and has fallen on an annual basis in three of the past four months.

“With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions,” said Lawrence Yun, NAR chief economist. “The housing market remains stuck in a holding pattern with little signs of breaking through. The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”

In the past five years, the national median sales price has risen 38%; hourly wages, meanwhile, increased just 12%, Yun observed. “This unsustainable trend is putting considerable pressure on affordability in some markets—especially for prospective first-time buyers—and is pricing out some households who would otherwise be looking to buy a home,” he said.

“Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April and inventory at the end of July was 9.0 percent lower than last July,” said Yun. “The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”

– Nicholas Stern, managing editor

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