Pending home sales reached its highest mark for the month of May since 2005, up 8% from the previous month of April as low inventory continues driving buyers to snatch up available real estate.
The strong increase in home sales and transactions in May —following a dip in April — was a surprise, per Lawrence Yun, National Association of Realtors chief economist, who attributed the home sales increase to mortgage rates remaining below 3%, as well as an uptick, nationally, in listings.
“Buyers are still lining up a feverish pace,” Yun said. “While [the COVID-19 pandemic, low inventory and high prices] have contributed to pricing out would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases.”
Contract signings on new homes increased 13.1% year over year.
All four U.S. regions reported month-over-month and year-over-year home sale gains, per a release from the NAR. The Northeast increased 15.5% in May, a 54.6% climb from 2020. In the Midwest, sales increased 6.7% monthly and 7.8% year over year. The South reported a 4.9% increase (6.1% increase year over year) and the West increased 10.9% (up 12.5% year over year).
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Metros with the largest year-over-year increase in pending home sales were Tampa-St. Petersburg-Clearwater, Florida; Detroit-Warren-Dearborn, Michigan; Nashville-Davidson-Murfreesboro-Franklin, Tennessee; Riverside-San Bernardino-Ontario, California; and Jacksonville, Florida.
Yun said he expects an increase in market listings in the second half of the year, as more homes are built and the federal mortgage forbearance program winds down. A decrease in lumber prices will do wonders for builders, too, he said.
“Home price growth will steadily moderate with increased supply, but a broad and prolonged decline in prices is unlikely,” Yun said. “If a reduction does occur in some markets, homebuyers will view the lower home price as a second-chance opportunity to get into the market after being outbid in previous conditions.”
Ruben Gonzalez, Keller Williams chief economist, added that he is “optimistic” new home construction will pick up.
“We will continue to gain momentum through the rest of the year if we can avoid further supply chain disruptions,” Gonzalez said. “Lumber prices have come down from all-time highs, but are still far above previous norms.”
The continued distribution of the multiple COVID-19 vaccines is key to a return of affordable building material prices and shorter supply delivery times to increase home sales. Builders have told HousingWire that they are struggling to find full crews to build homes, as enhanced unemployment benefits — enacted by the government to combat the effects of the pandemic — are keeping workers at home.