Pending home sales increased 1.8% in May compared with April and were up 1.1% compared with May 2024, according to the National Association of Realtors (NAR).
All four U.S. regions experienced month-over-month increases – most notably the West.
Year-over-year, contract signings rose in the Midwest and South, while they fell in the Northeast and West.
“Consistent job gains and rising wages are modestly helping the housing market,” says Lawrence Yun, chief economist for NAR. “Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains.”
“The Northeast’s housing shortage is boosting home prices, with more than a quarter of homes selling above list price,” Yun adds. “Conversely, more inventory in the South gives home buyers greater negotiation power. Price declines in the South should be considered temporary given the region’s strong job creation.”
Regionally, and month-over-month, contract signings were up 2.1% in the Northeast, 0.3% in the Midwest, 1.0% in the South, and 6.0% in the West.
“Even this modest increase in pending home sales is a welcome sign for a beleaguered housing market, as the May uptick followed a large dip in April, despite a steady upward trend in mortgage rates,” says Odeta Kushi, deputy chief economist for First American, in a statement. “The 2025 home-buying season may yet show some signs of life, as purchase mortgage applications – a separate leading indicator of housing activity – have also registered modest gains in May and June.”
“While overall sales activity remains subdued, the market has shown some tentative signs of improvement,” Kushi says. “Several factors have contributed to this slow thaw – wage growth is outpacing house price appreciation, giving affordability a chance to catch up, and inventory is increasing.”
“Life events continue to drive demand – diplomas, diapers, divorce, downsizing, and death,” she adds. “Still, affordability remains stretched, and macroeconomic uncertainty is keeping many buyers on the sidelines, but a glimmer of increased activity offers some cautious optimism for the remainder of the year, especially if rates moderate.”
Photo: Gabrielle Henderson