WASHINGTON—Pending home sales shrunk 2.7% in May from the previous month, the National Association of Realtors reported recently. Three U.S. regions posted monthly losses, while sales in the Northeast surged. All four regions saw year-over-year declines in transactions.
“Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” said NAR Chief Economist Lawrence Yun, “The lack of housing inventory continues to prevent housing demand from being fully realized.”
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—dropped 2.7% to 76.5 in May. Year-over-year, pending transactions fell by 22.2%. An index of 100 is equal to the level of contract activity in 2001.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” added Yun. “There should be more focus on boosting existing-home inventory with temporary tax incentive measures.”
Pending Home Sales Regional Breakdown
The Northeast PHSI climbed 12.9% from last month to 66.7, a decrease of 21.9% from May 2022. The Midwest index dropped 5.3% to 74.4 in May, down 23.5% from one year ago.
The South PHSI decreased 4.4% to 94.4 in May, reducing 19.6% from the prior year. The West index lessened 6.1% in May to 58.4, falling 26.6% from May 2022.
New Home Sales Rise 12.2% in May
A lack of existing inventory coupled with solid consumer demand helped to boost new home sales in May to their highest level since February 2022.
Sales of newly built, single-family homes in May increased 12.2% to a 763,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“Demand for new homes is strengthening because of a lack of existing home inventory,” said Alicia Huey, chairman of the National Association of Home Builders and a custom home builder and developer from Birmingham, AL. “And while builders continue to grapple with elevated construction costs, an encouraging sign is a big gain in home sales priced in the $200,000 to $300,000 price range. In May 2022, just 5,000 homes sold in this range and that total increased to 12,000 in May 2023.”
“The lack of resale homes available for sale, at just a three months’ supply, is supporting demand for newly-built homes,” said NAHB Chief Economist Robert Dietz. “New home inventory was 31% of total inventory in May. Historically it is typically 10% to 15%. Further, the pace of resales is down 20% from a year ago, while the rate of new home sales is up 20% from a year ago.”
New single-family home inventory in May was 428,000, down 2.9% compared to a year ago. This is down to a more balanced 6.7 months’ supply at the current building pace, despite tight existing home supply conditions. A measure near a 6.0 months’ supply is considered balanced.
The median new home sale price in May was $416,300, down 7.6% compared to a year ago.
Regionally, on a year-to-date basis, new home sales were up 0.8% in the Northeast and 1.6% in the South. New home sales were down 2.5% in the Midwest and 20.7% in the affordability-challenged West.
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“The struggle to create housing that is affordable for people across the entire spectrum of income will be the defining civic issue for this generation of leaders in the Hudson Valley,” Pattern CEO Adam Bosch said.
Data shows that from 1996-2021, the Hudson Valley region lost a net total of 146,763 people to out migration, which calculates out to 5% of the Hudson Valley’s population.
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