Signs were starting to point to a slowing housing market, but in a surprise swing, pending home sales increased in May, snapping a six-month skid. According to the National Association of Realtors, the pending homes sales index ticked up 0.7% in May from April when economists had expected a 4% contraction.
“The definitive unsustainable blip,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said.
The pending home sales index is a strong indicator for future home sales. In May, new home sales also increased by 10.7%, while existing home sales contracted 3.4%.
“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” NAR Chief Economist Lawrence Yun said. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”
Pending home sales are still down 13.6% on the year. Buyers might have felt more comfortable making deals in May when mortgage rates fell slightly, but the 30-year fixed rate inched back up in June, surpassing 6% by the middle of the month.
According to NAR, the monthly mortgage payment on a median single family home has gone up $800 since the start of the year.
The sales increase was largely regional, too. The Northeast saw a big boom in May, up 15.4% for the month, while the South barely increased at 0.2%. Sales declined in the West and Midwest, at 5% and 1.7%, respectively.
