Pending home sales rose in May.
Spencer Platt/Getty ImagesPending home sales in May unexpectedly rose to the highest reading for the month since 2005, the National Association of Realtors said Wednesday.
The trade group’s measure of pending sales, or homes in contract that have not yet closed, rose 8% from April’s revised rate and was 13.1% higher than the same month a year ago. The increase was unexpected, particularly after April’s drop in pending sales. Consensus estimates collected by FactSet had called for a 1.5% decrease month over month.
“May’s strong increase in transactions—following April’s decline, as well as a sudden erosion in home affordability—was indeed a surprise,” National Association of Realtors Chief Economist Lawrence Yun said in a release.
Yun credited the increase to declining mortgage rates, increasing supply, and buyer demand, even as prices rise. “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 in the release.
The median price of an existing home was a record $350,300 in May, the trade group said last week, 23.6% higher than the same month last year. Existing-home sales in May dropped month over month for the fourth time in a row, but remained higher than the year prior.
Yun said he expects home-price growth to moderate as supply increases. “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 said.
The increase could foreshadow a pickup in existing-home sales, but it comes amid a dip in home purchase application data—a sign that affordability concerns may have continued to affect home-buying activity. The Mortgage Bankers Association’s purchase index for the week ending June 25 was 17% lower than the same week a year ago, and 5.2% lower than the same week in 2019.
“Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals,” wrote Mike Fratantoni, the Mortgage Bankers Association’s chief economist. “The average loan size for total purchase applications increased, indicating that first-time homebuyers, who typically get smaller loans, are likely getting squeezed out of the market due to the lack of entry-level homes for sale.”
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