The number of homes under contract rose everywhere except the Northeast. NAR economist says confidence is up, and he expects pending-sales growth to continue.
WASHINGTON – U.S. pending home sales increased in May, a positive variation from a minor sales dip the previous month, according to the National Association of Realtors® (NAR). Three of major U.S. regions saw growth in contract activity, with the West experiencing a slight sales decline.
NAR’s Pending Home Sales Index (PHSI) – a forward-looking indicator based on contract signings – climbed 1.1% to 105.4 in May, up from 104.3 in April. Year-over-year contract signings declined 0.7%, marking the 17th straight month of annual decreases.
Lawrence Yun, NAR chief economist, said lower-than-usual mortgage rates led to the increase in pending sales for May. “Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers. Buyers, for good reason, are anxious to purchase and lock in at these rates.”
Yun said consumer confidence about home buying has risen, and he expects more activity in the coming months.
“The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points,” he says. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”
While contract signings and mortgage applications have increased, Yun says there’s still a great need for more inventory, noting, “Home builders have not ramped up construction to the extent that is needed. Homes are selling swiftly, and more construction will help keep home prices manageable and thereby allow more middle-class families to attain ownership opportunities.”
May regional breakdown
The PHSI in the Northeast rose 3.5% to 92.0 in May and is now 0.5% below a year ago. In the Midwest, the index grew 3.6% to 100.3 in May, 1.2% lower than May 2018.
Pending home sales in the South inched up 0.1% to an index of 124.1 in May, which is 0.7% higher than last May. The index in the West dropped 1.8% in May to 91.8 and decreased 3.1% below a year ago.
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