U.S. Pending Home Sales Pull Back More Than Expected In May

06:14, 29th June 2016

(RTTNews) - After reporting increases in U.S. pending home sales in the three previous months, the National Association of Realtors released a report on Wednesday showing that pending sales pulled back by more than expected in the month of May.

NAR said its pending home sales index slid 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April. Economists had expected the index to drop by 1.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the bigger than expected decrease, the pending home sales index is down by 0.2 percent compared to the same month a year ago, reflecting the first year-over-year drop since August of 2014.

NAR chief economist Lawrence Yun said, "With demand holding firm this spring and homes selling even faster than a year ago1, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity."

"Realtors are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market," he added.

The bigger than expected decrease in pending home sales reflected lower pending sales in all four regions of the country.

Pending home sales in the Northeast showed a notable 5.3 percent drop, while pending sales in the Midwest slid 4.2 percent and pending sales in the West and South declined 3.4 percent and 3.1 percent, respectively.

Looking ahead, Yun said the fallout from the U.K.'s decision to leave the European Union breeds both immediate opportunity as well as potential headwinds for the U.S. housing market.

"In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash," Yun said.

He added, "On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for homebuying."

Last Thursday, the Commerce Department released a separate report showing a pullback in new home sales in May.

The report said new home sales fell by 6.0 percent to an annual rate of 551,000 in May from the downwardly revised April rate of 586,000.

While the April rate was downwardly revised, it still represents the highest rate of new home sales since February of 2008.