A slew of housing data reports in the last week painted a hazy picture of the overall national market. But one clear message emerges from the fog: The West is showing some cracks.
Pending home sales increased for the second straight month in March nationwide. That followed a disappointing new-home sales report on Monday and a mixed report last week on existing-homes sales, which increased in March but failed to reverse a huge drop in February. Home values across the nation continued to rise, but the pace of increases moderated in February.
But industry insiders caution about reading too much into the recent unevenness. Chris Christopher, director of U.S. macro and global economics at IHS Global Insight, hasn’t changed his forecast for housing this year. And Jim Gaines, chief economist at the real estate center at Texas A&M University, noted that the year-over-year numbers remain positive.
“On a month-to-month basis, there’s more volatility and you can get too concerned,” says Gaines. “But there are some markets that are down.”
He’s talking about the West, which was the only region to experience a drop in pending sales last month. That’s not all. New-home sales there plummeted 23.6 percent versus the previous month. The Midwest recorded a double-digit gain and the South a 5 percent increase, while sales in the Northeast were steady. Sales of previously owned homes in the West did rise in March but clocked in a lower level than a year ago.
“Demand is starting to weaken in some areas, particularly in the West,” Lawrence Yun, chief economist of the National Association of Realtors, said in a statement. “As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row.”
Looking closer, California’s pending sales fell year-over-year in March for the third straight month, with the volume down in all major regions of the state. Pending sales in the Puget Sound area of Washington dropped about 4.5 percent in March year over year.
"We're experiencing gridlock," said J. Lennox Scott, CEO of John L. Scott Real Estate in Seattle, in a statement.
It’s not exactly the lack of homebuyers creating the stalemate. There aren’t enough people selling their homes, which has pushed prices sky-high. That has made it harder for some buyers—including move-up ones—to find an affordable home. The median home price has risen 38 percent in the last three years in the West, according to the NAR.
"Sellers want to find their next home before they list their current home, but because of the severe inventory shortage, it's hard to win in a multiple offer situation," Scott said. "It's a Catch-22 situation.”