The spring buying season appears to be more active than many had predicted, as both existing-home sales and pending home sales saw a monthly increase, according to the latest National Association of Realtors®’ (NAR) data.
NAR’s Pending Home Sales report for May tracked a 1.8% rise in contract signings, also up 1.1% year-over-year. A reversal of April’s 6.3% drop, May’s data returns pending home sales to the trend of increases seen in March and February.
NAR Chief Economist Lawrence Yun pointed to “consistent job gains and rising wages” as the main contributors to the rise.
“Hourly wages are increasing faster than home prices,” he continued. “However, mortgage rate fluctuations are the primary driver of home-buying decisions and impact housing affordability more than wage gains.”
Realtor.com® Senior Economist Jake Krimmel echoed Yun’s last statement, adding that high mortgage rates and the lock-in effect have “hindered” the spring buying season.
“On one hand, May’s pending home sale increase could be a sign of buyers finally beginning to get off the sidelines as the market balances,” he continued. “On the other, interest rates have been steadily rising throughout the spring home-buying season, and with the Federal Reserve holding steady, this could continue into the summer months.”
All four regions saw monthly increases, but were mixed year-over-year. The Northeast saw a 2.1% monthly rise, but fell 0.5% year-over-year. The Midwest grew 0.3% monthly and 2.6% yearly. The South saw a 1% monthly rise and 2% yearly rise, while the West jumped 6% monthly, but fell 1.2% year-over-year.
In terms of the regional variations, Yun noted that the cause can be attributed to the differences in inventory and price in each region.
“The Northeast’s housing shortage is boosting home prices, with more than a quarter of homes selling above list price. Conversely, more inventory in the South gives homebuyers greater negotiation power,” he explained. “Price declines in the South should be considered temporary given the region’s strong job creation.”
