Pending home sales fell 2.7% month-over-month in May, but that doesn’t mean buyer demand is dwindling. Instead, low inventory is the primary reason why contract signings are down 22% from a year ago, according to the National Association of Realtors (NAR).
Homebuyers are finding limited for-sale supply as existing homeowners hold onto their ultra-low mortgage rates rather than relocating and refinancing, but each listing is still receiving an average of three offers, NAR chief economist Lawrence Yun says. In the meantime, as existing home sales slow, the new-home market is booming.
Meanwhile, the market for new construction is a bright spot. Sales of newly built homes jumped 12.2% month over month in May and are up 20% compared to a year ago, the Department of Housing and Urban Development and the Census Bureau reported earlier this week.
“Demand for new homes is strengthening because of a lack of existing-home inventory,” says Alicia Huey, chairperson for the National Association of Home Builders. “And while builders continue to grapple with elevated construction costs, an encouraging sign is a big gain in home sales in the $200,000 to $300,000 price range.” In May, 12,000 homes were sold in that price range—more than double a year earlier, when that figure was 5,000, Huey says.
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