May Pending Home Sales Up 1.1%

June 28, 2019

Pending home sales increased in May, the National Association of Realtors reported yesterday.

NAR said its Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by 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.

Every region but the West saw improvement. Pending home sales in the South rose by 0.1% to 124.1 in May and by 0.7% from a year ago. In the Northeast, pending home sales rose by 3.5% to 92.0 in May but fell by 0.5% from a year ago. In the Midwest, the index rose by 3.6% to 100.3 in May but fell by 1.2% lower from a year ago. In the West, the index fell by 1.8 percent in May to 91.8 and fell by 3.1 percent from a year ago.

Joel Kan, Associate Vice President of of Economic and Industry Forecasting with the Mortgage Bankers Association, noted the unadjusted data showed an overall decrease, as well as declines in every region compared to a year ago.

“MBA’s purchase applications data are still showing year-over-year increases, which is possibly a sign that despite lower mortgage rates, tight inventory and affordability challenges are a major reason why rising mortgage applications are not translating to larger gains in contract signings,” Kan said.

NAR Chief Economist Lawrence Yun said May’s increase represented a positive variation from the minor sales dip seen in the previous month. He cited lower-than-usual mortgage rates as a factor leading to the increase.

“Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers,” Yun said. “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 said. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”