Pending home sales decreased 1.3% in April compared with March and decreased 3.3% compared with April 2016, according to the National Association of Realtors’ (NAR) Pending Home Sales Index.
It was the second consecutive month that pending home sales decreased, year over year.
Only the West saw an increase in contract signings last month.
The index score fell to 109.8 – down from a downwardly revised 111.3 in March.
Once again, limited supply was the main reason for the decrease in pending sales. Not only are home builders failing to keep pace with demand, but rising interest rates also mean many homeowners are now “stuck” in their current homes, with no way to move up.
Realtors report that foot traffic is actually up this spring; there are plenty of potential buyers – just not enough available homes.
In addition, rising home prices are giving many potential buyers a serious case of sticker shock.
“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,” reports Lawrence Yun, chief economist for NAR.
It doesn’t look like the supply situation is going to get better any time soon. The only thing that could potentially help the situation is if the institutional investors that scooped up thousands of properties and converted them into rentals in the years following the crash decided to start liquidating those assets. However, that hasn’t started happening yet.
“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 shortages,” Yun says in a statement. “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.”
Currently, Yun is forecasting that existing homes will reach 5.64 million this year – an increase of 3.5% compared with 5.45 million in 2016. The national median existing-home price this year is expected to increase around 5%. In 2016, existing sales increased 3.8% and prices rose 5.1%.