Pending sales continue downward trend in April

Fewer homes were going under contract in April, continuing a 2018 trend that real estate professionals attribute to an ongoing shortage of available homes for sale.

In the latest update of its Pending Home Sales Index, the National Association of Realtors set a figure of 106.4. This was down 1.3 percent from March's upwardly revised figure of 107.8, as well as a year-over-year decline of 2.1 percent.

The Pending Home Sales Index is a measure of transactions where a contract has been signed but a sale has not been finalized. This action typically takes place within two months, making the figure a good indicator of sales activity in the near future.

A figure of 100 is equal to the average contract activity in 2001, which fell between 5 million and 5.5 million existing home sales. This level of sales is considered normal for the current population of the United States.

"Feedback from Realtors, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher," said Lawrence Yun, chief economist at the National Association of Realtors. "The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels."

In its existing home sales report for April, the National Association of Realtors determined that there were 1.8 million homes for sale. While this was a substantial 9.8 percent increase from the previous month, it was still down 2.5 percent from April 2017 – the 35th straight month of annual inventory decreases.

The Pending Home Sales Index grew slightly from the previous month in February and March, but has gone down on an annual basis for four consecutive months. April marked the third lowest pending sales figure in the past year. Existing home sales have shown a yearover-year decline for three of the first four months of 2018.

Yun said higher mortgage rates and gas prices may also be creating more affordability pressures for people interested in buying a home.

"For now, the economy is very healthy, job growth is holding steady, and wages are slowly rising," he said. "However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates."

Each of the four U.S. regions saw a decrease in pending sales from the previous month, although the South had a year-over-year increase. The region's PHSI of 127.3 was down 1 percent from March, but still 2.7 percent higher than April 2017.

In the Northeast, the figure remained unchanged at 90.6, which was down 2.1 percent from the previous year. The PHSI in the West dropped 0.4 percent from the previous month and 4.6 percent from the previous year to 94.4. The figure of 98.5 in the Midwest marked a decrease of 3.2 percent from March and 5.1 percent from April 2017.

Despite the slowdown in pending sales, Yun expects that existing home sales in the U.S. will still exceed last year's tally. He forecasts that there will be 5.54 million transactions completed in 2018, which would be a yearover-year increase of 0.5 percent. He also predicts that median home prices will grow by 5.1 percent.

In 2017, existing home sales rose by 1.1 percent while median home prices jumped 5.7 percent.