Pending sales declined largely because property listings are down. NAR Economist Yun calls market “resilient with approximately three offers for each listing.”
WASHINGTON – Pending home sales shrunk 2.7% month-to-month in May, according to the National Association of Realtors® (NAR). Three out of four U.S. regions posted monthly losses, though sales surged in the Northeast. In a year-to-year comparison, however, all four regions saw declines.
But “despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” says NAR Chief Economist Lawrence Yun, “The lack of housing inventory continues to prevent housing demand from being fully realized.”
NAR’s Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – dropped to 76.5 (2.7%) in May. Year over year, pending transactions fell by 22.2%. An index of 100 is equal to the level of contract activity in 2001.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” adds Yun. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”
Pending home sales regional breakdown
- The Northeast PHSI climbed 12.9% from last month to 66.7, a decrease of 21.9% from May 2022
- The Midwest index dropped 5.3% to 74.4 in May, down 23.5% from one year ago
- The South PHSI decreased 4.4% to 94.4 in May, reducing 19.6% from the prior year
- The West index lessened 6.1% in May to 58.4, falling 26.6% from May 2022
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
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