Sales of pending homes declined 2.7 percent in May and were down 22.2 percent from a year ago, but the Northeast saw a 12.9 percent increase, according to new data from the National Association of Realtors.
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Pending home sales sagged between April and May, but the Northeast saw a spike while all other regions declined.
Sales of pending homes declined 2.7 percent in May and were down 22.2 percent from a year ago, according to data released Thursday by the National Association of Realtors.
NAR Chief Economist Lawrence Yun noted that despite a lack of pending contracts due to extremely low housing inventory, the few homes that are on the market are seeing strong interest.
“Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” Yun said in a statement. “The lack of housing inventory continues to prevent housing demand from being fully realized.”
Other experts said however that the slowdown occurring during what are typically some of the busiest homebuying months of the year should taper any hopes for a fast housing recovery.
“High hopes that the housing market’s returning to normalcy may be coming down to earth, with May showing a 2.7% decline in pending home sales,” Nerdwallet home expert Kate Wood said in a statement. “Normally, April to May would see a bump as homebuying season really gets underway.”
The Pending Home Sales Index for the Northeast saw a dramatic increase, climbing 12.9 percent to 66.7 from the previous month while remaining 21.9 percent lower than it was a year ago. In the Midwest, the index fell 5.3 percent and was down 23.5 percent from 2022, while the South saw a 4.4 percent monthly decrease and pending sales in the West decreased by 6.1 percent.
The largest contributor to the slowdown in contract activity has been the dropoff in housing inventory, with most homeowners reluctant to list their homes and lose their lower mortgage rates.
New listings have plummeted 27 percent since June of last year, according to a recent Redfin report — the greatest annual drop in any month since the start of the COVID-19 pandemic. Buyers have increasingly been seeking out newly constructed homes as an alternative, providing a balm to the housing construction sector, but Yun noted that new construction will not be enough to fill the gap.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” Yun said. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”