Pending home sales rebounded in May, reaching the highest reading for the month of May in 16 years. According to the National Association of Realtors (NAR), all four U.S. regions registered month-over-month and year-over-year gains in pending home sales in May.
Lawrence Yun, NAR’s chief economist, said, “May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise. The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”
The Pending Home Sales Index (PHSI) rose 8% in May to 114.7 contract signings. Year-over-year, signings increased 13.1%.
In a regional breakdown, Northeast PHSI increased 15.5% to 98.5 in May, up 54.6% from last year. In the Midwest, PHSI grew 6.7% to 107.7 in May, up 7.8% from last year. In the South, PHSI grew 4.9% to 135.5 in May, up 6.1% from last year.
“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 are evidently providing funds for home purchases,” Yun said. “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.”
“Home price growth will steadily moderate with increased supply, but a broad and prolonged decline in prices is unlikely,” Yun continued. “However, if a 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.”
A sale is listed as pending when the contract has been signed but the transaction has not closed. Pending sales are a good indicator of upcoming sales closings. More information on the PHSI can be found at www.nar.realtor/pending-home-sales.
