Housing shortage pulls down pending home sales

After finally breaking out of a two-month slump in March, pending home sales declined again in April due to the housing shortage.

Contract signings dropped 4.4% to 106.2 in April, according to the National Association of Realtors’ Pending Home Sales Index (PHSI). Annually, the index was up 51.7% from April last year, when pandemic-related shutdowns slumped sales to an all-time low.

“Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes,” NAR chief economist Lawrence Yun said. “The upper-end market is still moving sharply as inventory is more plentiful there.”

Yun expects that the increase in the comfortability of those listing and a rise in sellers will boost housing supply this fall.

Regional Breakdown

Pending home sales in the Northeast declined 12.9% to 85.3 in April, up 96.5% year over year. In the Midwest, sales increased 3.5% to 101.1 month over month, up 39.4% from April 2020.

The South PHSI declined 6.1% to 128.9 in April, up 45.3% year over year. The index in the West declined 2.6% to 92, up 57.3% from a year ago.

“The Midwest region, which has the most affordable homes, was the only region to notch a gain in the latest month,” Yun noted. “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.”