NAR: Rising Mortgage Rates Boosted Pending Home Sales In May

Pending home sales increased 6.7%, month over month, in May to reach the highest level since late 2006, according to the National Association of Realtors' (NAR) Pending Home Sales Index.

That is an increase of 12.1% from May 2012.

The jump was mostly a result of the fact that consumers were looking to lock in on favorable interest rates.

"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," said Lawrence Yun, NAR chief economist, in a statement. "This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."

Mortgage rates surged to the highest level in almost two years last week after the Federal Reserve announced a plan to wind down its stimulus program by mid-2014. The announcement incited a sell-off in the bond market that drove rates even higher.

In addition, home prices keep rising. The national median home price is forecast to spike by more than 10% to nearly $195,000 by the end of this year, Yun said. This would be the strongest increase since 2005, when the median increased 12.4%.

Existing-home sales are forecast to increase 8.5% to 9%, reaching about 5.07 million in 2013, the highest in seven years. This would be slightly above the 5.03 million total recorded in 2007.

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