Pending home sales fell for the fifth month in a row — but not for lack of demand, experts say.
The number of home contracts slipped 2.8 percent from December, according to the National Association of Realtors’ monthly index. Though it’s the fifth month of consecutive decline, it was the busiest January on record, with volume up 13 percent year over year.
A drop in pending home sales is often thought to indicate a drop in demand from homebuyers, but Lawrence Yun, NAR’s chief economist, attributed the decline to a lack of inventory.
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” he said in a statement.
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Inventory is at historically low levels. At the end of January, an estimated 307,000 new homes were for sale, or a four-month supply based on the month’s rate of sales. The unsold number of existing homes last month will be sold within 1.9 months, according to NAR’s latest report.
Joel Kan, head of industry forecasting at the Mortgage Bankers Association, agreed with Yun, but he also noted that rising home prices are locking some would-be buyers out of the market.
“Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country,” he said in a statement.
Additional housing inventory is coming, but homebuilders are facing some headwinds. Building permits to build new homes surged last month, but housing starts declined as construction costs increased.