After a hot start to the homebuying season, pending home sales in April slumped for the second consecutive month thanks in part to “astoundingly” low inventory, according to the National Association of Realtors.
NAR’s pending home sales index shows that the level of homes under contract decreased by 1.3 percent in April. That’s good for a 3.3 percent decline since the same time last year, which is the first year-over-year decline since last December and the largest since June 2014, when the index fell 7 percent.
That’s quite a turn from just a few months ago, as March saw the highest total home sales since February 2007, according to NAR. But that might be some of the problem – homes are in high demand, there just aren’t enough to go around. The few that are available got snatched up more quickly than ever, and there aren’t enough new homes for sale to offset that.
“… The rate of new listings continues to lag the quicker pace of homes coming off the market,” Lawrence Yun, chief economist for NAR, said in a statement. “Prospective buyers are feeling the double whammy this spring of inventory that’s down 9 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.”
Inventory issues a big factor
New home construction is lagging behind demand, and not enough homeowners are willing to list, possibly out of fear that they won’t be able to find a new home once theirs is sold, NAR reports.
Approximately 22 percent of homes sold in April were under contract within two weeks and nearly 25 percent sold above their list price, which is the highest percentage that Redfin has recorded. And since the homebuying season usually peaks in June, experts do not see an immediate end to the cycle.
“The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortages,” Yun said. “To date, there are no indications investors are ready to sell. However, they should be mindful of the fact that rental demand will soften as the overall population of young adults starts to shrink in roughly five years.”