Pending home sales dipped 2.7% in May, according to the latest data from the National Association of REALTORS® (NAR), as a resilient housing market is still trying to find an anchor this year, stretched between economic uncertainty and unwavering consumer demand.
“The lack of housing inventory continues to prevent housing demand from being fully realized,” said NAR Chief Economist Lawrence Yun in a statement.
The latest report, which showed monthly losses in three out of four census regions, comes after more encouraging data on new-home sales and housing starts, both of which point toward a surging market heading into the summer. But this data on pending sales—also a leading indicator—may temper optimism about what real estate will look like this summer.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” added Yun. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”
Dr. Lisa Sturtevant, Bright MLS chief economist, said in a statement that in a typical year, this is about the time that pending sales slow—though whether 2023 qualifies as typical is not clear.
“Pending sales activity declines between April and May as the spring market begins to wind down,” Sturtevant explained. “Seasonality in the housing market basically disappeared during the pandemic. Post-pandemic, there was an expectation that we would see a return to housing market seasonality, but it is going to take at least another year before market conditions reflect those more normal patterns.
As existing-home sales have faltered, which many economists have blamed on the so-called “mortgage lock” or “golden handcuffs” effect of homeowners hanging on to low rates, inventory appears to have become a primary bottleneck. At the same time, the strong demand and lack of available homes has propped up prices, helping stave off major drop-offs in home values (in most regions).
Sturtevant projected that this dynamic isn’t going to change immediately, despite the boosts to new construction.
“The spring market will extend into summer as buyers face limited choices and are waiting for mortgage rates to come down,” she said. “Market conditions in the Mid-Atlantic remain surprisingly strong, with home prices still rising and homes still selling quickly.”
Regionally, the biggest month-to-month and year-over-year declines came in the West—down 6.1% and 26.6%, respectively. The Northeast was the only region that saw a month-to-month increase, up a surprisingly strong 12.9%. The region also experienced a tremendous surge in new construction this spring.
In the Midwest, pending sales dropped 5.3%, down 23.5% from one year ago, and in the South, sales fell 4.4% from last month and 19.6% from the same time in 2022.
