Dip in Pending Home Sales Partially Due to Inventory Shortages

Pending homes sales declined in June,rnslipping 1.4 percent on the Pending Home Sales Index released this morning byrnthe National Association of Realtors® (NAR). rnThe Index, a forward looking indicator based on contract signings for homernpurchases, was 99.3 in June, down from 100.7 in May.  The May figure was also revised down from anrnoriginal estimate of 101.1.  </p

Despite the decline in June, figures forrnthe month are still 9.5 percent higher than they were in June 2011.  This marks the 14^th consecutivernmonth when the index was higher than it had been during the same period a yearrnearlier.</p

Lawrence Yun, NAR chief economist, said inventoryrnshortages are a factor.  “Buyer interest remains strong but fewer homernlistings mean fewer contract signing opportunities,” he said.  “We’ve beenrnseeing a steady decline in the level of housing inventory, which is most pronouncedrnin the lower price ranges popular with first-time buyers and investors.”</p

“Anyrnbank-owned properties that have been held back in markets with inventoryrnshortages should be released expeditiously to help meet market demand,” Yunrnsaid.  “Housing starts will likely need to double over the next two yearsrnto satisfy the pent-up demand for both rentals and ownership.”</p

The NAR pressrnrelease cited its Realtors Confidence Index which is derived from a surveyrnsimilar to the one conducted by the National Association of Home Builders inrnwhich its members are asked to gauge sales conditions and buyer traffic.  The NAR version is based on responses fromrnover 3,400 Realtors.  The Index put buyerrntraffic at 60 while seller interest was at 41 which NAR said shows a largernimbalance between buyers and sellers.  Arnvalue of 50 implies neutral market conditions; the disparity between buyer andrnseller interest began to grow in early spring and has been in a particularlyrnlarge imbalance for the past two months.</p

On a regionalrnbasis the Pending Home Sale Index fell 7.6 percent in the Northeast to 76.6 inrnJune but is 12.2 percent higher than a year ago.  In the Midwest the indexrnslipped 0.4 percent to 94.4 in June but is 17.3 percent above June 2011. rnPending home sales in the South declined 2.0 percent to an index of 106.2 inrnJune remaining 8.8 percent above a year earlier.  In the West the indexrnrose 2.6 percent in June to 111.5 and is 3.0 percent higher than June 2011.</p

Yun said thatrnsome closings have been delayed, partially because of a surge in refinancingrnbrought on by record low mortgage rates. rnThese transactions, on top of a higher level of home purchases havernslowed the closing process.  </p

“In addition, therernhave been some delays with recent foreclosure sales as banks take steps tornensure there are no paperwork problems.  This is causing an unevenrnperformance in sales closings, which is likely to continue, but we also seernnotably higher levels of sales activity compared with a relatively flatrnperformance in the preceding four years.” Yun said.

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