Pending US home sales slumped in May amid supply shortage

NAR forecasts sales of existing homes will rise 3.7% to 5.44 million in 2016, although last week’s United Kingdom referendum injects more uncertainty into the housing market, Yun noted. This was steeper than the 1.1% drop expected by economists, with all four regions experiencing a cutback in contract activity last month.

Yun said there was a growing chorus of complaints that buyers continue to be frustrated by the tense competition in a tight market and the lack of affordable homes for sale.

“There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth”, NAR chief economist Lawrence Yun said in a statement.

The United Kingdom’s decision to leave the European Union has injected some uncertainty into the US housing market; the turbulence in financial markets and a shift into safer investments like Treasuries could lead to lower mortgage rates.

Yun added that market volatility following the Brexit vote is likely to cause lower mortgage rates and increase demand from foreign buyers looking for safe assets.

Still, overall home ownership has dropped near a 48 year low.

Pending home sales in the South declined 3.1 percent to an index of 126.6 in May but are still 0.6 percent higher than last May. But the number of listings sank 5.7 percent from a year ago, meaning that homebuyers have limited choices. At the end of May, there was a 4.7-month supply of unsold existing homes and a 5.3-month supply of newly built homes at the current sales paces.

Homes are also spending far less time on the market, averaging 30 days in May, compared to 40 days a year ago. That’s 2.6 percentage points higher than forecasted.

While the April rate was downwardly revised, it still represents the highest rate of new home sales since February of 2008. Purchases of previously owned homes are tabulated when a deal closes, typically a month or two later.

Although Wednesday’s report indicates risks on existing home sales, transactions in the housing market have been robust this spring. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current US population.