Home Sales Return Strong in May to the Industry's Surprise

In an unexpected turn, home sales came back strong in May after several months of relaxing sales. From April to May, pending home sales increased 8%. This comes after analysts forecasted a 1% increase, says CNBC. The increase marks the highest level of sales activity for May in 16 years. Pending home sales preview closed home sales coming in the near future, and May’s activity signals healthy market activity. Compared to one year ago, pending sales were up 13% in May. The National Association of Realtors’ chief economist calls the unexpected activity a “surprise” but notes mortgage rates, which dipped below 3%, could be the reason.

After falling quite sharply in April, the average on the 30-year fixed hovered in a tight range throughout May, giving some buyers at least a little relief on potential monthly payments.

But sky-high home prices have been a major concern. In April, the much-watched S&P Case-Shiller National Home Price Index was up more than 14% year over year, the largest gain in its 30-year history.

The Realtors report even higher gains in the median home price, some of which is skewed due to the fact that more of the sales activity is happening on the higher end of the market, where listings are more plentiful. The low end of the market is barely budging, as first-time buyers struggle for meager listings. Investors, the majority of whom use cash, are also more prevalent at the lower end of the market.

Weekly mortgage demand is falling, down nearly 7% on the week, according to the Mortgage Bankers Association — a sign that the housing boom might be starting to fizzle.

“While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said.

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