The increase in May was the biggest monthly gain since NAR began tracking in 2001, and was an indication that demand for housing remains strong, the association said.
“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.”
The number of pending home sales is considered a primary indicator of housing activity. Pending sales include signed real estate contracts for existing single-family homes, condos, and cooperatives that have not yet closed. Since there is generally a month or two of delay between the signing of a contract on a property and the closing of the agreement, the Pending Home Sales Index generally leads the complete sales of existing houses for a month or two.
Rising demand and continuing low interest rates are drawing buyers to the market, said Joel Kan, associate vice president of industry and economic forecasting for the Mortgage Bankers Association. “Even with high unemployment and economic uncertainty, the buying market is strong.”
“One factor that could hinder growth in the coming months is that the release of accumulated demand from earlier this spring is colliding with the low supply of new and existing homes on the market,” he said. “An additional home inventory is needed to give buyers more options and to prevent home prices from rising too fast.”
“This move confirms that May closings could represent a low point for home sales, with much better June and July figures,” said Danielle Hale, chief economist at Realtor.com.
But potential coronavirus outbreaks in specific parts of the country may delay recovery, he said.
“Hot spots of emerging viruses in the south and west could derail the trend of improvement,” said Hale. “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.”
All regions of the country recorded the jump in home sales transactions pending month after month in the index. The West had the largest increase, 56% in May. The Northeast increased by 44%, the South by 43% and the Midwest by 37%. However, all regions fell for a year, except the South, which rose 2% over last year.
“The outlook has improved significantly as new home sales are expected to be higher this year than last year, and annual sales of existing homes are projected to decrease by less than 10%, even after the off-season is missed. spring shopping due to pandemic closure, “Yun said.
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