Investing.com - Contracts to buy previously owned homes unexpectedly fell in May, according to data released on Wednesday by the National Association of Realtors (NAR).
NAR said its pending home sales index, which measures signed contracts for homes where transactions have not yet closed, fell 0.5% to a reading of 105.9 after falling by 1.3% in the previous month.
Economists had forecast pending home sales rising 1.1% last month.
NAR indicated that pending home sales have now fallen on an annualized basis for the fifth straight month, while May’s decrease was due to a larger decline in contract activity in the South that offset gains in the Northeast, Midwest and West.
"Pending home sales underperformed once again in May, declining for the second straight month and coming in at the second lowest level over the past year,” NAR chief economist Larry Yun said.
“Realtors in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled,” he explained.
Yun said that what he called a “lackluster spring” has primarily been a supply issue, and not one of weakening demand.
According to this expert, the underlying closing data in May showed that home price gains are still outpacing income growth, inventory declined on an annual basis for the 36th consecutive month, and listings typically went under contract in just over three weeks.
“With the cost of buying a home getting more expensive, it’s clear the summer months will be a true test for the housing market,” Yun said.
He highlighted the increase in new home construction to a 10-year high as an encouraging sign.
“Several would-be buyers this spring were kept out of the market because of supply and affordability constraints,” Yun remarked.
“The healthy economy and job market should keep many of them actively looking to buy, and any rise in inventory would certainly help them find a home,” he concluded.