Pending Home Sales: Decline Highlights High-Inventory Problem

Pending homes sales declines suggests high inventory problem
Pending homes sales declines suggests high inventory problem

Forget that home prices are stabilizing and new-home sales are rising, it's the amassing inventory of homes that could mire the housing market's recovery.

According to The Wall Street Journal, the decline in the pending-home-sales index indicates that inventory is rising, meaning there are too many houses and too few buyers.

Pending sales -- signed contracts on the purchase of new homes -- had fallen 3 percent in June compared to the previous month, according to data released Tuesday by the National Association of Realtors. That's a further decline from May, when the index sank 30 percent on the heels of the April 30 deadline for the homebuyer tax credit.

If fewer homes are being bought and developers continue to build, then a smaller piece of the backlog of vacant homes (about 2.5 million nationwide) are being consumed. So the question is, if unemployment and economic conditions remain stagnant, how long will the inventory last?