After six consecutive months of declines, pending home sales rose slightly in May, recording a 0.7% month-over-month increase, resulting in an index reading of 99.9, according to data released Monday by the National Association of Realtors.
In April, the index’s reading was 99.3. Year over year, the Pending Home Sales Index was down 13.6%, marking the 12th consecutive month of annual drops. An index of 100 is equal to the level of contract activity in 2001.
“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” Lawrence Yun, NAR’s chief economist, said in a statement. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”
According to NAR, at the median single-family home price and with a 10% down payment, the monthly mortgage payment has increased by about $800 since the beginning of the year as mortgage rates have climbed by 2.5 percentage points since January.
“Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy,” Yun said. “The better way to balance the market is through increased supply, which also helps the broader economy.”
All four major U.S. regions recorded year-over-year decreases in contract signings. The Western region saw the largest drop at 19.8% to a reading of 81.6. Compared to a year ago three out of four regions posted double digit pending sales declines, with the Midwest only dropping only 8.8%. Month over month, the South (119.0) and the Northeast (86.7) saw increases of 0.2% and 15.4.2%, respectively. The Midwest (98.6) and the West (81.6) recorded monthly decreases of 1.7% and 5.0%, respectively.
Yun attributes the regional difference in pending home sales activity in May to variation in home prices and affordability.
