U.S. pending home sales increased 17% in June, the second consecutive month of double-digit gains, as low mortgage rates spurred demand for homes.
A seasonally adjusted index measuring signed contracts was 6.3% above the year-ago level after state lockdowns caused by the COVID-19 pandemic pushed transactions into summer months, said Lawrence Yun, chief economist of the National Association of Realtors.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” said Yun. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
The Fed began buying Treasuries and mortgage-backed securities in March to grease the wheels of the credit markets. That sent interest rates tumbling toward an all-time low reached in mid-July, when the average U.S. fixed rate for a 30-year home loan fell to 2.98%, according to Freddie Mac. It was the first time it broke the 3% threshold in a data series that goes back to 1971.
Sales of existing homes probably will fall by 3% in 2020 to 5.18 million, and sales of new homes likely will rise by 3% to 704,000, Yun said in a forecast he issued in tandem with the home sales report.
The median price of an existing home this year probably will increase 4.3% to $283,600, the forecast said. The median price for a new home likely will gain 1.1% to $324,900, according to the forecast.
Pending home sales in the Northeast region of the U.S. rose 54% in June, the biggest gain in the report. In the Midwest, sales increased 12.2%, in the South the index was up 11.9% and in the West the gain was 11.7%, the report said.
“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun said. “These remarkable rebounds speak to exceptionally high buyer demand.”