The National Association of Realtors (NAR) said that its Pending Home Sales Index dropped 0.8% to 108.5 in May, representing the third consecutive monthly decrease.
The index reflects a drop in transactions in the Northeast, South, and West. However, pending sales in the Midwest were flat during the month, which could be good news if you plan to sell a house for cash in St. Louis, or Kansas City in Missouri through agencies such as Klamen Real Estate.
A lack of homes on the market primarily led to fewer sales. Some economists predicted that sales would increase by 0.8% in May, but the actual data revealed the opposite. The NAR based the decline from signed deals in the same month.
Every year pending home sales dropped 1.7%. Despite the drop, NAR chief economist Lawrence Yun said that more property owners believe that the timing to sell their homes is better now than a year ago. Still, sales will probably remain neutral, while a lack of supply will continue to lift property prices.
The monthly drop also indicated the succeeding pending sales would drop in the coming months.
As prices increase for residential properties, wage growth has failed to keep up and this further complicated buyers’ efforts. On the other hand, low mortgage rates have not been very helpful. If there is a rate increase, it will contribute to their ongoing struggle.
For example, properties worth between $750,000 and $1 million in May rose 26% year over year. A strong economy has driven this increase, as well as a tight employment market with a 4.3% drop in the jobless rate for the month.
Inventory woes currently plague the residential property market in the U.S. The NAR index should only serve as a market indicator, instead of a key reason not to consider divesting their properties.