Contract signings to purchase previously owned U.S. homes unexpectedly declined in April, underscoring the housing market’s challenge centered around a persistent inventory shortage, according to data from the National Association of Realtors in Washington.
The pending home sales index fell 1.3% compared with March (there was a 0.4% gain expected) after an upwardly revised 0.6% increase. The gauge rose 0.4% compared to April 2017 on an unadjusted basis after a 4.3% decline.
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The latest results show home sales may struggle to gain much traction in coming months. A limited number of for-sale properties is keeping prices elevated at a time when mortgage rates have climbed to an almost seven-year high. Such headwinds make home ownership more difficult for some prospective buyers. Nonetheless, a healthy job market and lower taxes are expected to underpin housing demand. Data released last week showed existing-home sales fell in April to a three-month low.
"The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels," Lawrence Yun, NAR’s chief economist, said in a statement.
At the same time, "demand for buying a home is very robust," Yun said. "Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher."
Signings dropped in three of four regions, led by a 3.2% decline in the Midwest; a 1% decline in the South; and a 0.4% in the West. Sales agreements were unchanged in the Northeast. The pending home sales index for West was lowest since June 2014. 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.