In a significant reversal of economic trends, a lack of available housing stock was enough to slow the pace of home sales in February, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator the association calculates and publishes based on contract signings, slipped 0.4% to 104.8 in February from a downwardly revised 105.2 in January, the NAR said, but is 8.4% higher than February 2012 when it stood at 96.6.
Contract activity has been above year-ago levels for the past 22 months; the data reflect contracts but not closings, the NAR added.
The association reported that prior to January, the last time the index showed a higher reading was in April 2010 when it was 110.9, shortly before the deadline for the home buyer tax credit.
Lawrence Yun, NAR chief economist, said limited inventory is holding back the market in many areas. "Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels," he said.
"Most local home builders are small businesses and simply don't have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market," Yun said.
He projected existing home sales will rise about 7% in 2013 to approximately 5 million sales, which is near the current level of activity.
"The volume of home sales appears to be leveling off with the constrained inventory conditions, and the leveling of the index means little change is likely in the pace of sales over the next couple months," the NAR economist said.