Pending home sales dipped to a seasonally adjusted annual rate of 110.8 in May, down -3.7% month-over-month and -0.2% year-over-year, according to a Wednesday release from the National Association of Realtors.

May’s result puts an end to the growth seen for three consecutive months, and foreshadows a potential slowdown in future existing home sales. The pending home sales index, based on signed real estate contracts for existing single-family homes, is a key tool to measure the housing contract activity and to predict future existing home sales in one or two months ahead.

“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,” said NAR chief economist Lawrence Yun in a statement. "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.”

All regions saw a slump in pending home sales during May. The South continues to be the most active region , but still reported a -3.1% month-over-month decline. Pending home sales went down -3.4% in the West, -4.2% in the Midwest, and -5.3% in Northeast. Year-over-year, the South is the only market that saw a modest 0.6% growth.

Mortgage rates held firm in this month at a lower-than-normal 4%, which came at a time when the Federal Reserve put its rate-hike proposal on hold--and would possibly keep doing so--due to a devastated labor market and the abrupt Brexit.

“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,” Yun 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.”

Despite a contraction in this month's contract signing, Yun expected the existing sales this year to climb above earlier predictions to be around 5.44 million, up 3.7% from 2015. The national median price for existing homes, however, is estimated to have a modest increase between 4% and 5%.

Read the full release here>>

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