In May, US pending home sales increased to a six-month high. This rise beat expectations despite high mortgage rates and tight supply. The index jumped 3.8% last month.
Surprising Growth in Pending Home Sales
The pending home sales index reached 76.8. This is the highest level since last November. Economists had originally forecast a much smaller increase of 0.8%.
Compared to last year, contracts jumped 4.8%. Contracts increased across all four major US regions. The Northeast soared by 8.7%. The Midwest also saw an 8.1% surge.
Market Challenges and Mortgage Rates
Buyers faced challenges from rising mortgage rates. The US-backed war with Iran drove up oil prices. This caused inflation and Treasury yields to climb higher.
The 30-year fixed mortgage rate increased over 50 basis points. This rise began when the conflict started in late February. However, Washington and Tehran recently agreed to end the war.
Expert Insights on Future Housing Supply
The Northeast region remains highly constrained by low inventory. Despite this, it is now showing more buyer contract signings.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), noted that the region previously had slower home sales. Yun stated that more supply is desperately needed.
Ultimately, more homes will help moderate home price growth.
Conclusion
The recent surge in pending home sales shows strong demand. Buyers remain active despite higher borrowing costs.
Ending the recent overseas conflict may help stabilize the market. Still, low housing supply remains a primary concern for buyers.
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