Spring Existing Home Sales: Big Flop


The pending home sales report, a strong indicator of existing home sales, suggests another bad month is on the way.

The NAR's Pending Home Sales Report suggests the Spring buying season was a big flop.

Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month, according to the National Association of Realtors®. A larger decline in contract activity in the South offset gains in the Northeast, Midwest and West.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.5 percent to 105.9 in May from 106.4 in April.

Lawrence Yun, NAR chief economist, says this year’s spring buying season will go down as one of unmet expectations. “Pending home sales underperformed once again in May, declining for the second straight month and coming in at the second lowest level over the past year,” he said. “Realtors® in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled.”

The lackluster spring, according to Yun, has primarily been a supply issue, and not one of weakening demand.

“With the cost of buying a home getting more expensive, it’s clear the summer months will be a true test for the housing market. One encouraging sign has been the increase in new home construction to a 10-year high,” added Yun.

NAR Humor

Now that Spring is toast, the true test is supposedly Summer.

Note the lead-in graphic.

Allegedly, "an index above 100 coincides with a historically high level of homes sales activity."

Yet, pending sales are down year-over-year the 5th straight month.

Looking for more humor? I can help.

The Econoday consensus was for pending home sales to rise 0.6%.

Econoday Parrot Dead?

For at least a month, Econoday stopped commenting on any economic results. Econoday posts expectations and results, but it no longer comments on the results.

I miss the humorous comments from its trained parrot, typically about "hidden strength". The parrot was good for laughs at least three out of every four economic reports.It could find hidden strength in cooked spaghetti.

The Econoday parrot may be gone, but we still have Yun, the NAR's parrot.

Perhaps the parrot is ill or on vacation. If so, I send best wishes for a speedy recovery.

Existing Home Sales

On June 20, I reported Existing Home Sales Down Again: Yun Blames Inventory, a Symptom of the Problem

Heading into the report this is what Econoday had to say: " Existing home sales fell below Econoday's low estimate in April and a sizable bounce back is expected in May, to a consensus annualized rate of 5.500 million vs April's 5.460 million. Even with a better showing, resales have been stubborn and weak as April's year-on-year rate was in the minus column at negative 1.4 percent."

Spring is over. The pending sales report says the month of June will be another flop. Not to worry. Autumn may be the real "true test".

Mike "Mish" Shedlock

Comments (4)
No. 1-4

Lots of missing data here. Since houses run a gamut of different qualities, what is it about the inventory that is lacking? If Joe Six-pack wants a 2500 sq ft colonial in a certain quality neighborhood, is it that said house type doesn't exist in that type of neighborhood? Or it does, but its too expensive? Or it does and at the right price, but it is in a lower quality neighborhood? Do "Realtors (insert little R with circle here)" not capture this type of data? If not, how the hell would they know if it is an inventory problem?


A small notch down from near-record hysteria is not a "flop".

Mike Mish Shedlock
Mike Mish Shedlock


A small notch down from near hysteria. Have a look


As a licensed Realtor I can say that tight inventories are an issue but NAR economists focus on it too blindly as the source or value growth and driver of the market. It’s true that there are low inventories in most markets but the value growth is being driven more so by a smaller group of people competing over a smaller group of resources. The issue that is limiting overall sales numbers is the lack of income growth for average Americans. Income growth has been limited to the top half or third of American households and has actually been declining or stagnant for the lower brackets. The lower segments of the population can not afford an entry level home as they largely do not exist in most major markets. Without the initial seed of homeownership it is hard for a buyer to move up in the market. Hence, there is a smaller pool of buyers who can qualify for an average priced home in most markets. You might ask them why are we not in a buyers market if they are in short supply. The answer is the inventory of new homes continue to be historically low. High land prices, rising cost of materials and lack of willing labor are driving new home prices well above any entry level buyer and even some move up buyers. I know many contractors who can’t scale up their business due to a lack of workers. Without new home inventory pushing the market the existing home sales will continue to be constrained. The lack of mobility in the market will limit overall sales numbers now and for years to come. In sum, the same class of people continue to circulate the market churn leaving out many aspiring Americans from attaining homeownership. Looking towards the future I would anticipate America taking on more of a European model where renters become the norm as our long term economic cycle and generational age cycle get more mature. Buy rentals if they are affordable!

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