Pending sales of U.S. homes posted a surprise drop in May, marking the third straight month of declines amid a shortage of homes listed for sale.
The Pending Home Sales Index from the National Association of Realtors fell 0.8% to 108.5, reflecting a drop in the number of contracts signed in May. The results bucked expectations. Economists were looking for an increase of 0.8% compared to the prior month, according to a Thomson Reuters poll.
The NAR noted that pending home sales were down in the Northeast, South and West. Buying activity in the Midwest held steady.
Demand for housing remains strong, thanks to an improved labor market and stronger economy. But with a lack of available homes, rising prices have kept many potential buyers on the sidelines. “Buyer interest is solid, but there is just not enough supply to satisfy demand,” said Lawrence Yun, NAR’s chief economist.
The decline in May pending home sales signals that existing sales could weaken in the coming months, when those contracts are finalized.
The NAR said existing home sales are on pace to hit 5.63 million this year, a 3.2% gain year-over-year. The national median existing home price is forecasted to increase around 5%.
Home prices climbed 5.1% in 2016, while sales of existing homes were up 3.8%.