More job opportunities and rising housing inventory can drive more buyers to the market
Pending home sales bounced back last month due to lower-than-usual mortgage rates.
National Association of Realtors’ Pending Home Sales Index rebounded 1.1% to 105.4 in May from 104.3 in April. The index also recorded the 17th consecutive month of year-over-year decline.
Historically low rates, according to NAR Chief Economist Lawrence Yun, have driven the increase.
"Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers,” he said. “Buyers, for good reason, are anxious to purchase and lock in at these rates. The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points. Job creation and a rise in inventory will nonetheless drive more buyers to enter the market."
All but one of the four major regions saw growth in contract activity. Only the PHSI in the West inched down 1.8% to 91.8 in May. The Northeast, Midwest, and South all experienced an increase – 3.5% (to 92), 3.6% (to 100.3), and 0.1% (to 124.1), respectively. On a year-over-year basis, the Northeast, Midwest, and the West were lower by 0.5%, 1.2%, and 3.1%, respectively, while the South was 0.7% higher a year ago.
Yun said the year-over-year increase could indicate a rise in supply. However, he clarified that there is still a great need for more inventory.
"Home builders have not ramped up construction to the extent that is needed," Yun said. "Homes are selling swiftly, and more construction will help keep home prices manageable and thereby allow more middle-class families to attain ownership opportunities."
Some of the hottest housing markets last month included Rochester, N.Y., Fort Wayne, Ind., Lafayette-West Lafayette, Ind., Boston-Cambridge-Newton, Mass., and Midland, Texas.
