Pending US Home Sales Slumped In May Amid Supply Shortage

[Purveyor]

Source: Bloomberg

Contracts to purchase previously owned U.S. homes fell more than projected in May, a sign demand cooled after a robust start to the busiest selling season of the year, figures from the National Association of Realtors showed Wednesday in Washington.

Key Points

Index of pending home resales fell 3.7 percent (forecast was 1.1 percent drop), the most in six years, after a revised 3.9 percent increase in April
Measure rose 2.4 percent from May 2015 on an unadjusted basis (forecast was gain of 4.6 percent)
Pending sales declined in all four regions, including a 4.2 percent drop in the Midwest index to the lowest level since January
Sales gauge declined to 110.8 on a seasonally adjusted basis, with 100 indicating “historically healthy” buying activity, according to NAR

Big Picture

Home price appreciation and a limited supply of available properties are bridling sales, while first-time buyers or Americans with lower incomes and poor credit are finding it difficult to qualify for financing. A potential loss of momentum in housing would trigger concern at a time when growth is restrained by weak business investment and U.S. exports.

Economist Takeaways

“There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth,” NAR chief economist Lawrence Yun said in a statement. “With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity.”

Read more: http://www.bloomberg.com/news/articles/2016-06-29/pending-sales-of-existing-homes-in-u-s-fall-more-than-forecast

[GummyBearz]

1. Am I reading this wrong?

This whole thing seems contradictory, and I wouldn't put it past the NAR chief economist to either be an idiot or to fudge up words on purpose. Lets look at his words.

Supply is decreasing: "There are simply not enough homes coming onto the market to catch up with demand..."

Demand is constant (even though homes are selling faster than a year ago? Doesn't that mean demand has increased relative to supply??): "With demand holding firm this spring and homes selling even faster than a year ago..."

By the logic of supply&demand, that means prices should be increasing, but...

But prices are constant: "Home price appreciation and a limited supply of available properties are bridling sales" (I had to look up the definition of bridling, it is a restraining mechanism mostly used when talking about horses but could be applied to other things)

Lets give him the benefit of the doubt that he understands economics and supply&demand. What the heck can anyone even get from his statements? He seems to contradict himself non-stop. There is less supply, there is constant demand (even though homes are selling faster which implies increased demand), and prices are constant... these statements don't seem to make sense at all

Maybe I am the dumbass here? Someone please explain if I am just not getting it...

[whatthehey]

2. Yes I think so

Supply decreases. Demand stays constant. "Home price appreciation" means they are increasing in price. That's why they are selling quickly (same demand chasing fewer options. Demand has increased relative to supply even if not in raaw numbers) for higher prices and low end buyers are having trouble. All fits. As prices stay high, more people will choose to sell.

[proverbialwisdom]

3. "As prices stay high more people will choose to sell" & homes convert into global investment assets.

Last edited Wed Jun 29, 2016, 04:41 PM - Edit history (1)

Check out the real estate sales in LA County. In low crime, unpolluted areas, the floor for a very modest house is $750K. Browse Trulia, Zillow, RedFin, Realtors.com awhile and pay attention to the property histories. Staggering inflation.

[whatthehey]

4. Partly yes, partly no

Some people will be able to sell now they are finally no longer underwater from the housing collapse. Some people will be able to sell to afford a retirement they have delayed. Not every sale at increasing prices is a quick flip for profit.

[PasadenaTrudy]

5. Check out my zip code

91030, for a laugh.