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Pending Home Sales Down, West Outpacing Rest of Country

According to the National Board of Realtors (NAR), the United States housing market is dealing with its lowest inventory supply in history. Nationwide, pending home sales slipped by 10.6% in January 2021 to February 2021, with national sales 0.5% lower year over year.

According to NAR’s chief economist Lawrence Yun, the current slump in sales is due to lack of inventory, not a lack of buyers. Yun explains, “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift. But contracts are not clicking due to record-low inventory.”

The 1.03 million homes for sale at the end of February 2021 represent a 29.5% drop from February 2020, the largest annual decline on record. Home sales are varying by price point, with homes priced $250,000-$500,000 seeing the most action simply because there is more inventory in that price range. In contrast, homes listed at less that $250,000 move very quickly, often with multiple offers, which is great news for sellers but frustrating for buyers. Further, according to the latest S&P CoreLogic Case-Shiller home price index, home prices continues to climb quickly, with an 11% increase from a year ago. Home listed at the lower end of the market, where supply is lowest, are seeing the strongest price increases. All of this adds up to great news for sellers and some frustration for buyers.

“Potential buyers may have to enlarge their geographic search areas, given the current tight market. If there were a larger pool of inventory to select from – ideally a five- or a six-month supply – then more buyers would be able to purchase properties at an affordable price,” Yun explains.

Still, despite a slight rise at the beginning of 2021, mortgage rates remain at historic lows and buyers are eager to find their new homes. Compared to the rest of the country, the West continues to post the most consistent housing numbers, with the lowest month over month decline in pending sales and a 1.9% increase in year over year sales.

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