Pending home sales soared in May, reaching their highest level in seven years, the National Association of Realtors reports.
NAR’s Pending Home Sales Index rose 6.7% to 112.3 in May, up from a downwardly revised 105.2 index score in April. From last year, the index is up 12.1%.
Contract activity came in at the strongest level since December 2006, when it reached 112.8. For the past 25 months, pending sales have been above year-ago levels.
Lawrence Yun, NAR chief economist, believes there may be a fence-jumping effect.
"Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher," Yun said. "This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."
With the national median existing-home price expected to increase more than 10% to nearly $195,000, Yun upgraded his price forecast for 2013. This would mark the strongest increase since 2005, when the median increased 12.4%.
Existing home sales are expected to rise 8.5% to 9.0%, reaching 5.07 million sales in 2013 — the highest level in seven years. In 2007, 5.03 million sales were recorded.
The PHSI in the Northeast remained unchanged at 92.3 in May but is 14.3% above year ago levels.
In the Midwest, the index jumped 10.2% to 115.5 in May and is 22.2% higher than May 2012.
Pending home sales in the South rose 2.8% to an index score of 121.8 in May, up 12.3% from a year ago.
Meanwhile, the index for the West jumped 16.0% to 109.7. With limited inventory, the region is only 1.1% above May 2012 levels.