U.S. Pending Home Sales in May Fell to Lowest This Year, Lack of Housing Inventory

US pending home sales fell unexpectedly more by 2.7% month-over-month in May 2023 missing market expectations of a 0.5% fall. Pending home sales were lower in the Midwest (-5.3%), the South (-4.4%) and the West (-6.6%) but rose in the Northeast (12.9%). For perspective year-on-year, pending home sales are down 22.2% year-on-year from May 2022 and marking a 24th straight month of declines.  In March however we saw a resurgence in mortgage rates and a banking crisis which could delay a much-awaited housing market turnaround.


National Association of Realtors® Pending Home Sales

May 2023 Highlights

  • Pending Home Sales (M/M) May: -2.7% (est -0.5%; prev 0.0%; prevR -0.4%)
  • Pending Home Sales (Y/Y) May: -20.8% (est -20.5%; prev -22.6%; prevR -22.8%)
United States Pending Home Sales MoM

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.

“The lack of housing inventory continues to prevent housing demand from being fully realized”, said NAR Chief Economist Lawrence Yun. Still, “Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing.”

Pending Home Sales by Region

  • 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

“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.”

About Pending Home Sales

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.

The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

About the National Association of REALTORS®
The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.

Source: NAR

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