Buyers signed contracts to buy homes in May at the highest rate in four months, never mind high prices and short supply.
May was the best month since January for the pending home sales index, a measure of contract signing activity, the National Association of Realtors said in a monthly report Wednesday. The index increased 8% in May compared to the month before, rebounding from a 4.4% drop in April.
"May's strong increase in transactions—following April's decline, as well as a sudden erosion in home affordability—was indeed a surprise," said Lawrence Yun, chief economist at the National Association of Realtors, in a statement.
The strong indicator of future home sales signals a change in direction for the housing market. Sales had declined for the previous four months, cooled by high prices and a lack of available homes, after jumping when the pandemic hit and peaking in October at the hottest since the bubble of 2006.
Low mortgage rates, increasing vaccinations and an overall return to normalcy—not to mention government stimulus money still kicking around—are all contributing to boost applications, said Brent Campbell, an economist at Moody’s Analytics, in a commentary. However, he predicted the low supply of homes would nonetheless continue to be a drag on sales.
Indeed, a different leading indicator for the housing market, taken in June rather than May, showed mortgage applications for purchases sliding to their lowest levels in over a year. The seasonally adjusted purchase applications index fell 5% the week ended June 25, the lowest point since May 2020, the Mortgage Bankers Association said Wednesday.
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