By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Constrained housing inventory continues to be a concern and the speed bump that’s slowing down what otherwise may have been an overwhelmingly busy spring home buying season in many markets.

Pending home sales – a closely watched housing indicator – increased in March and remained above levels from last year. But it showed only modest movement, which indicates that we’re in for another couple months of slower-than-we’d-hoped-for sales, according to the latest index released this week from the National Association of Realtors.

NAR’s Pending Home Sales Index increased 1.5% to 105.7 in March from 104.1 in February. It was 7% higher than March 2012 when it was 98.8. The data tracks contract signings, not closings, which makes it a good prognosticator of things to come.

Not surprisingly, the numbers show that a slower sales and contract pace is not due to a slack in demand, but rather a lack of supply – a problem we’ve talked about plenty here.

In related news, the home building industry has been hustling and bustling this year, enjoying rising revenues and even some IPOs.

However, CNBC points out that despite rising demand, some builders are slowing down production. That sounds counter-intuitive to what’s happening out there today.

Why not increase production at a time when the appetite for homes is strong and growing? It’s simple: building costs are also rising. Some builders will need to control their production to be sure that the rising costs of construction don’t sideline their growth and derail them.

How might this development potentially snag the market for resale homes? It just means that supply may continue to be tight until we reach our tipping point where more owners who are currently underwater either come above water or reach a point where they could afford to sell.

It could also mean values continue upward at a more rapid pace than we originally predicted. I don’t think builders are going to stop building, but this rise in costs is something they’ll each face as they look to build more.

I tend to think of these things not as snags but as blessings in disguise. If there’s one thing we learned from the last housing boom and the downturn that followed, it’s that the faster you climb the harder you fall.

Maybe a little reality check to stop and catch our breath is a good thing in the overall picture.

Happy house hunting!