The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis agrees. The quote of the day from this NAR release:
… contract activity is fading this spring because significantly weak supply levels are spurring deteriorating affordability conditions…
Analyst Opinion of Pending Home Sales
The unadjusted data shows the rate of year-over-year growth significantly deteriorated this month – and the more important rolling averages declined. Because there is so much noise in the monthly numbers – the rolling averages are the best way to view the data.
I continue to see few signs that the residential sales market is improving.
Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).
The NAR reported:
- Pending home sales index was down 1.3 % month-over-month and down 3.3 % year-over-year.
- The market [from Bloomberg / Econoday} was expecting month-over-month growth of -0.5 % to 1.4 % (consensus +0.5 %) versus the -1.3 % reported.
Econintersect‘s evaluation using unadjusted data:
- the index growth rate accelerated 6.0 % month-over-month and down 5.4 % year-over-year.
- The current trends (using 3 month rolling averages)is decelerating.
- Extrapolating the pending home sales unadjusted data to project April 2017 existing home sales would be a 4.4 % contraction year-over-year for existing home sales.
From Lawrence Yun , NAR chief economist:
…. contract activity is fading this spring because significantly weak supply levels are spurring deteriorating affordability conditions. Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market. Realtors® are indicating that foot traffic is higher than a year ago1, but it’s obviously not translating to more sales.
Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.
Unfortunately, there is little evidence these astoundingly low supply levels are going away soon. Homebuilding activity has not picked up enough this year and too few homeowners are listing their home for sale.
The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortage. To date, there are no indications investors are ready to sell. However, they should be mindful of the fact that rental demand will soften as the overall population of young adults starts to shrink in roughly five years.
