NAR: Contract Signings Flat, More Inventory ‘Critical’

The spring homebuying season is milder than in recent years, but it’s not being driven by a lack of consumer interest in housing.

To get more home buyers moving, they’re going to need more choices of homes for sale. Pending home sales recorded no change in April, a month that is typically one of the busiest times of the year in home sales.

The latest reading from the National Association of REALTORS®’ Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—showed contract signings flat in April compared to March. Nevertheless, contract signings are 20.3% below last year’s bustling pace.

“Not all buying interests are being completed due to limited inventory,” says Lawrence Yun, NAR’s chief economist. “Affordability challenges certainly remain and continue to hold back contract signings, but a sizable increase in housing inventory will be critical to get more Americans moving.”

Existing-home sales in April posted a 3.4% month-over-month drop in April, NAR reported last week. The housing market has remained sensitive to ongoing inventory shortages and even recent small fluctuations in mortgage rates, economists say.

A bright spot for the housing market lately has been the new-home market, which has been answering the call by providing inventory to buyers starved for greater choices. New-home sales jumped about 4% in April and are now 11.8% above a year ago, the Commerce Department reported this week.

Builders are using incentives to attract buyers to new-home sites. Fifty-four percent of builders offered some type of incentive to help ramp up sales in May, according to the National Association of Home Builders. Those builder incentives often included reducing mortgage payments, like covering closing costs and mortgage rate buydowns.

Twenty-seven percent of builders also said they dropped their prices in May, the builder’s trade group notes. The median new home sale price dropped in April to $420,800, an 8% decrease compared to a year ago.

Regional Breakdown

Three of the four major U.S. regions posted monthly increases last month in pending home sales, with the Northeast being the sole region that saw a decrease. However, all four regions saw year-over-year declines in transactions.

“Minor monthly variations in regional activity are typical,” Yun says. “However, cumulative results over many years clearly point toward a much greater number of home sales in the South.”

In using 2001 as a historical benchmark for sales performance, the South’s pending home sales activity is similar to 2001, Yun notes. On the other hand, the Midwest region’s activity has fallen 22% in that time. The Northeast and Western regions are about 40% lower than they were in 2001, Yun says.

A map of the US split into the country's four regions showing pending home sales information in each one.