Pending home sales dropped in April, despite two prior months of increases. According to the National Association of Realtors, pending homes sales decreased by 1.3 percent in April.
Pending home sales dropped from 107.8 in March to 106.4 in April. As a result, the index is down on an annualized basis of 2.1 percent for the fourth consecutive month.
NAR’s Pending Home Sales Index is “a forward looking indicator based on contract signings.” Similar to various housing market issues in 2018, NAR Chief Economist Lawrence Yun attributes the decline to the inventory shortage around the country.
“Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out. Feedback from Realtors, as well as the underlying sales data, reveal that the demand for buying a home is very robust,” he said. “Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher. The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”
Along with low inventory and higher prices, Yun thinks other expenses will cause hesitation for homebuyers this summer. If gas prices and mortgage costs continue to increase, potential buyers are not as likely to purchase homes.
“For now, the economy is very healthy, job growth is holding steady and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates,” said Yun.
Despite the decrease in pending sales, Yun predicts existing-home sales in 2018 will increase slightly to 5.54 million, 0.5 percent higher than 2017.
In April, the Midwest index declined 3.2 percent to 98.5 percent, which is 5.1 percent lower than April 2017.