Pending home sales bounced back strongly in May and surged to the highest reading for the month of May since 2005, the National Association of REALTORS® reported Wednesday.
NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, climbed 8% in May compared to April. Contract signings are up 13.1% compared to a year earlier.
“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.”
Buyers are shaking off record-high home prices and low inventories of homes for sale. Housing inventories are down 20.6% compared to a year ago. Also, the median existing-home price for all housing types posted a record year-over-year increase of 23.6% in May, according to NAR data. The median home price was $350,300.
“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 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 also predicts that home price growth will gradually moderate as more homes are listed on the market. “But a broad and prolonged decline in prices is unlikely,” Yun says. “However, if a reduction occurs in some markets, home buyers 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.”
All four major regions of the U.S. posted month-over-month and year-over-year gains in contract signings last month, NAR reported.