Despite rising mortgage interest rates, pending home sales increased slightly in May, rising 0.7% compared with April, according to the National Association of Realtors (NAR).
The increase follows six straight months of decreases.
Regionally, and month over month, contract signings jumped 15.4% in the Northeast, however, they fell 1.7% in the Midwest, 0.2% in the South, and 5.0% in the West.
Year over year, pending home sales saw double digit decreases in three out of the four regions, while sales dropped by 8.8% in the Midwest.
“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” says Lawrence Yun, chief economist for NAR, in a statement. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”
According to NAR, at the median single-family home price and with a 10% down payment, the monthly mortgage payment has increased by about $800 since the beginning of the year as mortgage rates have climbed by 2.5 percentage points since January.
“Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy,” Yun adds. “The better way to balance the market is through increased supply, which also helps the broader economy.”
While the housing market remains unbalanced nationwide with demand far outpacing supply, Yun noted variations in home prices and affordability contributed to the regional differences in pending sales activity in May.
“The largest decline in contract activity was observed in the West region, where homes are the most expensive,” he says. “This further indicates the growing need to increase supply to tame home price growth and improve the chances of ownership for potential home buyers.”
Photo: Scott Graham