This is the first recorded rise in sales in seven months
The National Association of Realtors’ index of pending home sales increased 0.7% from last month to 99.9 according to newly released data, where an index of 100 is equal to the level of contract activity in 2001. This contrasts with the median forecast of a 4% drop made by economists in a Bloomberg survey, and marks the first rise in sales recorded in seven months.
At the median single-family home price, with a 10% down payment, the monthly mortgage payment has increased by around $800 since January, the NAR noted. Meanwhile, mortgage rates are close to hitting their highest levels since 2008, further complicating affordability challenges brought on by high housing prices.
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While rising rates are expected to make borrowing costs even more expensive, Federal Reserve Chair Jerome Powell expected this to temper demand for homes, ease price pressures, and flatten home prices “fairly quickly”. The Federal Reserve is currently raising interest rates to cool demand in the economy, including for housing, and tame decades-high inflation.
By region, contract signings in the Northeast and South rose, while those in the Midwest and West declined, NAR said. All four areas were down the year prior.
The pending home sales index is based on contract signings rather than when a contract closes. Sales of previously owned homes fell for a fourth consecutive month in May, receding to the lowest level in almost two years. Compared with a year earlier, contract signings were down by 12% on an unadjusted basis.
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“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” NAR’s chief economist Lawrence Yun said in a statement.
