The National Association of Realtors (NAR) is reporting that pending home sales took a step back in April, dropping over March’s total, due in part to the record low inventory of homes available in Q1.
NAR’s Pending Home Sales Index (PHSI) fell 4.4% to 106.2 in April. Year-over-year, signings jumped 51.7% as last year's pandemic-related shutdowns slumped sales to an all-time low. An index of 100 is equal to the level of contract activity in 2001.
"Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes," said Lawrence Yun, NAR's Chief Economist. "The upper-end market is still moving sharply, as inventory is more plentiful there."
NAR reported low Q1 inventory, with the rising cost of materials and lack of skilled laborers a concern among new home builders. Data from the National Association of Home Builders (NAHB) found that the price of lumber has tripled over the past year, forcing the price of a new single-family home to rise $35,872 on average, and thus impeding the nation’s home supply.
Regionally, the Northeast PHSI declined 12.9% to 85.3 in April, a 96.5% jump from a year ago. In the Midwest, the Index increased 3.5% to 101.1 last month, up 39.4% from April 2020. Pending home sales transactions in the South fell 6.1% to an Index of 128.9 in April, up 45.3% from April 2020. The Index in the West decreased 2.6% in April to 92.0, up 57.3% from a year prior.
"The Midwest region, which has the most affordable homes, was the only region to notch a gain in the latest month," Yun said. "Some buyers from the expensive cities in the West and Northeast, who have the flexibility to move and work from anywhere, could be opting for a larger-sized home at a lower price in the Midwest."
Yun forecasts an improvement in housing supply as soon as autumn. He points to an increase in the comfortability of those listing, as well as a rise in sellers after the conclusion of the eviction moratorium or as they exit forbearance.
As of now, sellers are continuing to reap profits on home sales, with half of the homes sold nationwide going for more than their list price during the four-week span ending May 16, a 23% rise from the same period year-over-year. According to Redfin, over that same four-week span, home prices hit a record high of $352,975, up 24% year-over-year. Asking prices increased to $358,975, also a record high. Homes recorded a record-high 101.7% average sale-to-list price ratio, which measures how close homes are selling to their asking prices, up 3.2 percentage points year-over-year, meaning the average home sold for 1.7% more than its asking price.
“Home sellers know that they have the upper hand, and are using it to ask for high prices expecting that buyers will meet their demands,” said Realtor.com Chief Economist Danielle Hale. “So far, it appears they’re right. Many recent buyers report paying even more than asking, just to win the offer, but still being happy with their purchase. Despite today’s slip in pending home sales, with more homeowners planning to list a home for sale during the next 12 months than we’d typically expect, we could see a roughly steady pace of home sales, and satisfied new homeowners, in the months ahead.”