Pending home sales spiked in May amid lower mortgage rates and higher inventory, with increases in pending sales across all four regions of the country.
According to the National Association of Realtors (NAR), the Pending Home Sales Index based on contract signings rose 6.1 percent in May, though figures remain below last year’s numbers. The increase, however, represented the largest month-over-month gain since April 2010.
“Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” NAR Chief Economist Lawrence Yun said. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”
Yun said that while the market posted positive gains during the month, affordability and credit access remain obstacles for first-time homebuyers, who accounted for 27 percent of existing home sales in May and generally carry student loan debt and lower credit scores.
“The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10 percent behind last year’s pace,” Yun said. “Meanwhile, apartment rents are expected to rise eight percent cumulatively over the next two years because of tight availability. Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable.”
Based on region, the Northeast saw the largest spike at 8.8 percent, followed by a 7.6 percent increase in pending home sales in the West, a 6.3 percent increase in the Midwest and a 4.4 percent increase in the South.