A crane stands next to an apartment building under construction on 57th Street in New York, U.S. (Photographer: Yana Paskova/Bloomberg)

U.S. Pending Home Sales Increased Less Than Forecast in March

(Bloomberg) -- A gauge of signed contracts to purchase previously-owned U.S. homes rose less than forecast in March and the prior month’s reading was revised down, indicating a lack of inventory is restraining the market, according to data released Monday from the National Association of Realtors in Washington.

Highlights of Pending Home Sales (March)

  • Index rose 0.4% m/m (est. 0.7% gain) after a revised 2.8% increase (prev. 3.1%)
  • Gauge declined 4.4% y/y on an unadjusted basis after a revised 4.7% decrease

Key Takeaways

The latest results show that interested buyers continue to face a persistent shortage of affordable inventory that is driving up property prices faster than wage growth. Nonetheless, a solid job market and lower taxes are helping underpin demand for housing even as mortgage rates climb to an almost five-year high.

The NAR revised its annual sales forecast to 5.61 million existing homes this year, 1.8 percent more than in 2017. It previously projected sales would match last year’s 5.51 million.

NAR data released earlier this month showed existing-home sales climbed to a four-month high in March. The Realtors group said half of the houses sold were on the market for less than a month. The NAR has said it expects the market will remain tight until more institutional investors list their properties and more homeowners agree to sell their houses.

Official’s Views

“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” Lawrence Yun, NAR’s chief economist, said in a statement. “Prospective buyers are increasingly having difficulty finding an affordable home to buy.”

“It is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth,” he said. “Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers -- especially first-time buyers -- will be left on the sidelines.”

Other Details

  • Purchases dropped 5.6 percent in the Northeast, reflecting multiple winter storms
  • Sales declined 1.1 percent in the West, and climbed 2.5 percent in the South and 2.4 percent in the Midwest
  • Economists consider pending sales a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a deal closes, typically a month or two later

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