Pending sales rose 8% month-to-month in May and 13.1% year-to-year – the highest May reading (114.7) since 2005. NAR’s economist calls it a surprise following April’s decline and less affordability; but higher wealth and “rising prices evidently provided funds for purchases.”
WASHINGTON – Pending home sales rebounded strongly in May, reaching the highest reading ever for the month of May since 2005, according to the National Association of Realtors® (NAR). All four U.S. regions included in the report saw both month-over-month and year-over-year gains in pending home-sale-contract transactions for the month.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 8.0% to 114.7 in May. Year-over-year, signings increased 13.1%. An index of 100 is equal to the level of contract activity in 2001.
“May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” says Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”
Although the past year saw its share of obstacles – including a pandemic, record-high prices and all-time low inventory – buyers still lined up at a feverish pace, according to Yun.
“While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices is evidently providing funds for home purchases,” Yun says. “More market listings will appear in the second half of 2021, in part from the winding down of the federal mortgage forbearance program and from more home building.
Yun expects home prices to “steadily moderate,” but “a broad and prolonged decline in prices is unlikely. However, if a (price) reduction occurs in some markets, homebuyers will view the lower home price as a second-chance opportunity to get into the market after being outbid in previous multiple-bid market conditions.”
Realtor.com’s Hottest Housing Markets data revealed that out of the largest 40 metros, the most improved metros over the past year, as of June 29, were Tampa-St. Petersburg-Clearwater; Detroit-Warren-Dearborn, Mich.; Nashville-Davidson-Murfreesboro-Franklin, Tenn.; Riverside-San Bernardino-Ontario, Calif.; and Jacksonville.
May pending home sales regional breakdown: The Northeast PHSI increased 15.5% to 98.5 in May, a 54.6% year-to-year climb. In the Midwest, the index grew 6.7% to 107.7 last month, up 7.8% from May 2020.
Pending home sales transactions in the South rose 4.9% to an index of 135.5, up 6.1% from a year ago. The index in the West increased 10.9% in May to 102.0, up 12.5% year-to-year.
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