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 registered both month-over-month increases and year-over-year gains for pending home sales contract transactions for the month of May.
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 8.0 percent to 114.7 in May. Year-over-year, signings increased 13.1 percent. 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,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3 percent, and from an uptick in listings.”
Although there has been a series of obstacles over the last year, including an unprecedented pandemic, record-high prices and all-time low inventory, buyers are still lining 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 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.”
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, Florida; Detroit-Warren-Dearborn, Michigan; Nashville-Davidson-Murfreesboro-Franklin, Tennessee; Riverside-San Bernardino-Ontario, California; and Jacksonville, Florida.
May Pending Home Sales Regional Breakdown
The Northeast PHSI increased 15.5 percent to 98.5 in May, a 54.6 percent climb from a year ago. In the Midwest, the index grew 6.7 percent to 107.7 last month, up 7.8 percent from May 2020.
Pending home sales transactions in the South rose 4.9 percent to an index of 135.5 in May, up 6.1 percent from May 2020. The index in the West increased 10.9 percent in May to 102.0, up 12.5 percent from a year prior.