Supply shortages and higher metro area home prices are being blamed for a third consecutive decline in pending home sales.
Figures released by the National Association of Realtors (NAR) show the Pending Home Sales Index (PHSI), which is based on contract signings, was down 0.8% in May.
It now stands 1.7% below the same month last year, marking the second straight year-over-year decline.
"Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales," said NAR Chief Economist Lawrence Yun. "Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast."
Yun says the lower prices ranges are the markets that are hardest hit by housing shortages. Sales of homes during May under $100,000 were down 7.2% from last year and those between $100,000 and $250,000 rose just 2%.
"The lack of listings in the affordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity," said Yun. "Meanwhile, many prospective first-time buyers can't catch a break. Prices are going up and there's intense competition for the homes they're financially able to purchase."
Sales by region
- The PHSI in the Northeast dipped 0.8% in May, but was 3.1% higher than they were a year earlier.
- In the Midwest the index was unchanged from April, and is down 2.8% from May 2016.
- Pending home sales in the South fell 1.2% and are now 1.4% the same month the year before.
- The index in the West was down 1.3%, and is now 4.5% below a year ago.