Pending Sales of Existing Homes in U.S. Fall More Than Forecast

Contracts to purchase previously owned U.S. homes fell more than projected in May, a sign demand cooled after a robust start to the busiest selling season of the year, figures from the National Association of Realtors showed Wednesday in Washington.

Key Points

  • Index of pending home resales fell 3.7 percent (forecast was 1.1 percent drop), the most in six years, after a revised 3.9 percent increase in April
  • Measure rose 2.4 percent from May 2015 on an unadjusted basis (forecast was gain of 4.6 percent)
  • Pending sales declined in all four regions, including a 4.2 percent drop in the Midwest index to the lowest level since January
  • Sales gauge declined to 110.8 on a seasonally adjusted basis, with 100 indicating “historically healthy” buying activity, according to NAR

Big Picture

Home price appreciation and a limited supply of available properties are bridling sales, while first-time buyers or Americans with lower incomes and poor credit are finding it difficult to qualify for financing. A potential loss of momentum in housing would trigger concern at a time when growth is restrained by weak business investment and U.S. exports.

Economist Takeaways

“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,” NAR chief economist Lawrence Yun said in a statement. “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.”

Other Details

  • NAR projects 5.44 million previously owned homes will be sold this year, up 3.7 percent from 2015
  • Contract signings dropped 5.3 percent in the Northeast, 3.1 percent in the South and 3.4 percent in the West
  • Economists consider pending sales a leading indicator because they track contract signings. Purchases of previously owned homes are tabulated when a deal closes, typically a month or two later.
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