The Pending Home Sales Index decreased 0.5% in May, and remains 2.2 % below the level one year ago, having declined on an annualized basis for the fifth straight month. The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR). The PHSI decreased to 105.9 in May from 106.4 in April.
The PHSI increased 2.9% in the Midwest, 2.0% in the Northeast and 0.6% in the West. However, the PHSI decreased 3.5% in the South. Year-over-year, the PHSI remained unchanged in the South, but declined 2.5% in the Midwest, 4.1% in the West and 4.8% in the Northeast.
The limited inventory of homes for sale caused NAR to characterize the spring buying season as one of unmet expectations. However, new home sales increased in May, and builder confidence slipped only slightly despite soaring lumber prices. As the expanding economy continues to fuel a healthy job market, the demand for new residential construction will continue to grow.