May experienced a rebound in pending home sales, posting the highest reading ever for the month since 2005, according to the National Association of REALTORS® (NAR).
The Pending Home Sales Index (PHSI), increased 8.0% to 114.7 in May. Year-over-year, signings increased 13.1%. An index of 100 is equal to the level of contract activity in 2001.
All four U.S. regions increased both month-over-month and year-over-year for pending home sales in May.
Regional Breakdown:
Northeast
+15.5% MoM — 98.5 PHSI
+54.6% YoY
Midwest
+6.7% MoM — 107.7 PHSI
+7.8% YoY
South
+4.9% MoM — 135.5 PHSI
+6.1% YoY
West
+10.9% MoM — 102.0 PHSI
+12.5% YoY
What the Industry Is Saying:
“May’s strong increase in transactions—following April’s decline, as well as a sudden erosion in home affordability—was indeed a surprise. The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.
“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. 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.
“Home price growth will steadily moderate with increased supply, but a broad and prolonged decline in prices is unlikely. However, if a reduction occurs in some markets, homebuyers 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.” — Lawrence Yun, NAR Chief Economist
“As buyers and sellers began to look forward to a post-pandemic landscape, contract signings increased in May. The increase in May pending home sales underscore the current real estate market, which is being propelled by strong buyer demand, favorable demographics and low interest rates. At the same time, the number of homes available for sale remains well below a year ago, even when compared to the quarantine lockdown period.
“This signals a desperate need for additional sellers and more new construction. Although we are beginning to see an improvement in the supply of existing homes for sale and the cost of building materials moderate, which should lead to more new construction, a larger increase in supply is key to rebalancing the real estate market.” — George Ratiu, realtor.com® Senior Economist
“We believe existing home sales are going to see much harder year-over-year comparisons for the remainder of the year, as the base for comparison moves away from the slump generated in the early months of the pandemic and into the surge in home sales that followed.
“With the pressure on sales from the lack of inventory and rapidly rising prices, we are likely going to see sales start moving toward single digit year-over-year growth and perhaps some year-over-year declines in Q4, due to last year’s divergence from normal seasonal patterns.
“Lumber prices have come down from all-time highs but are still far above previous norms. The current tariffs on Canadian lumber are creating a barrier to supply that could help alleviate the shortage created by a lack of capacity to increase domestic production.
“New-home construction is the primary means by which we can alleviate the current inventory shortages, and we are optimistic it will continue to gain momentum through the rest of the year if we can avoid further supply chain disruptions.” — Ruben Gonzalez, Keller Williams Chief Economist
For more information, please visit www.nar.realtor.
