Pending homes sales stumbled in July for the fourth time in five months as only the West saw an increase in contract activity, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.8 percent to 109.1 in July from a downwardly revised 110.0 in June. After last month's decline, the index is now 1.3 percent below a year ago and has fallen on an annual basis in three of the past four months.

Lawrence Yun, NAR chief economist, says the staggering inventory woes throughout the country continue to stall contract activity. "With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions," he said. "The housing market remains stuck in a holding pattern with little signs of breaking through. The pace of new listings is not catching up with what's being sold at an astonishingly fast pace."

According to Yun, in the past five years, the national median sales price has risen 38 percent, while hourly earnings have increased less than a third of that (12 percent). This unsustainable trend is putting considerable pressure on affordability in some markets – especially for prospective first-time buyers – and is pricing out some households who would otherwise be looking to buy a home. Despite this growing obstacle, Yun says data and feedback from Realtors continues to confirm that the slowdown in existing sales since spring is the result of a supply problem and not one of diminished demand.

"Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9.0 percent lower than last July," said Yun. "The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell."  

With autumn at the doorstep, Yun expects existing-home sales to close out the year at around 5.49 million, which is only an increase of 0.7 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

"The combination of weaker contract signings and the expected pause in activity in the Houston region because of Hurricane Harvey will likely slow overall sales growth in coming months," said Yun.

The PHSI in the Northeast inched backward 0.3 percent to 97.7 in July, but is still 2.4 percent above a year ago. In the Midwest the index decreased 0.7 percent to 103.3 in July, and is now 2.8 percent lower than July 2016.

Pending home sales in the South declined 1.7 percent to an index of 123.1 in July and are now 0.2 percent below last July. The index in the West expanded 0.6 percent in July to 102.3, but is still 4.0 percent below a year ago.