Dive Brief:
- Pending home sales dropped 3.7% in May to a rate of 110.8, down from the downwardly revised rate of 115.0 in April, the National Association of Realtors reported Wednesday.
- May's rate was 0.2% lower than May 2015 — marking the first time in nearly two years that pending sales declined year over year.
- All U.S. regions saw pending sales decline in May. Pending sales slid 5.3% in the Northeast, 4.2% in the Midwest, 3.4% in the West, and 3.1% in the the South.
Dive Insight:
May pending home sales saw a more severe drop than expected, as economists surveyed by The Wall Street Journal forecast only a 2.0% slide.
NAR Chief Economist Lawrence Yun blamed the slump in pending home sales on the faster pace of sales in recent months snatching available properties off the market. "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," he said in a release.
After a strong April for the housing market, residential activity somewhat wavered in May. Builder confidence rose two points to a score of 60, housing starts slipped only 0.3% last month after a major boost in April, existing home sales grew 1.8% to a nine-year high, and new home sales slid 6.0%.
Despite increased new construction activity, real estate groups continue to implore builders to expand inventory, especially in the starter-home market. In response, homebuilders cite rising regulatory costs as a major obstacle to adding more inventory. The Urban Institute reported earlier this month that even though single-family construction had seen slight gains compared to the lowest point of the housing crash, the current pace has only reached six homes per every 10 new households.
