Pending sale real estate agent sign
Daniel Acker | Bloomberg | fake pictures
According to the National Association of Realtors, pending home sales increased a staggering 44.3% in May compared to April.
That’s the biggest jump in a month in the survey’s history, dating back to 2001. It exceeded expectations for a 15% increase. However, sales were still 5.1% lower compared to May 2019.
The pending sales measure signed contracts on existing homes, thus showing that buyers were shopping during the month of May. Sales fell 22% during April as the economy closed to slow the spread of the coronavirus.
“This has been a spectacular recovery for contract firms, and it demonstrates the resilience of American consumers and their undying desire to own homeownership,” said Lawrence Yun, chief economist at NAR. “This recovery also talks about how the housing sector could lead the way to a broader economic recovery.”
However, the market still needs more supply, Yun noted. “Still, more home construction is needed to counter the persistent underproduction of homes in the past decade.”
According to the NAR, the supply of existing homes for sale at the end of May was almost 19% less annually. Single-family housing starts in May were not as strong as expected, although building permits, a future construction measure, gained some momentum.
Housing supply remains extremely low, but is improving in some markets. Active lists increased by more than 10% during the month in San Francisco, California, Denver and Colorado Springs, as well as in Honolulu.
Buyers returned to the market despite restrictions on open houses in many states. Real estate agents are offering virtual tours, as well as individual tours of empty houses, where buyers can open a safe and tour the homes themselves. Some buyers are signing contracts on homes that have never physically entered.
Fund mortgage rates are also helping buyers in a market that remains expensive due to high demand. The average 30-year fixed mortgage rate started in May at around 3.20%, according to Mortgage News Daily. In early June it fell below 3%.
Sales of newly built homes, which are also measured by signed contracts, increased nearly 17% in May, compared to April, and were 13% higher than in May 2019, according to the US Census. Builders have been seeing strong demand from buyers looking to leave densely populated urban areas. They also benefit from the shortage of existing homes for sale.
While the recovery was rapid in May, the future is not exactly set, especially given the latest spikes in the Covid-19 cases.
“Emerging virus hot spots in the south and west could derail the trend of improvement,” said Danielle Hale, chief economist at realtor.com. “For now, demand is still resilient, but we are looking at the new listing trend as it is a good indicator of what is to come for home sales.”
Regionally, pending home sales in the Northeast increased 44.4% during the month, but decreased 33.2% over the previous year. In the Midwest, sales increased 37.2% monthly and decreased 1.4% annually.
Pending home sales in the South increased 43.3% month-over-month and increased 1.9% since May 2019. In the West, sales increased 56.2% monthly and were 2.5% lower annually.
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