US pending home sales drop more than expected in May

US pending home sales fell more than expected in May, according to data from the National Association of Realtors (NAR).

The NAR’s monthly index declined 3.7% to 110.8 from a downwardly-revised 115.0 in April. This was steeper than the 1.1% drop expected by economists, with all four regions experiencing a cutback in contract activity last month.

The index tracks signings for purchases of previously-owned homes.

The NAR's chief economist, Lawrence Yun, said: “With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity.

“Realtors are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.”

Yun also commented on the UK’s decision to leave the European Union, saying the fallout from Brexit breeds immediate opportunity as well as potential headwinds for the US housing market.

“In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash,” he said. “On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for homebuying.”