Nationwide, pending home sales bounced back in May from a dip the
previous month, a sign that home buyers are returning to the
market as lower borrowing costs improve
affordability. Three of the four major U.S. regions saw an increase in pending
home sales last month, the National Association of REALTORS® reported Thursday.
NAR’s Pending Home Sales Index, a forward-looking indicator based on
contract signings, rose 1.1% to a reading of 105.4 in May. Year over year,
however, contract signings are down 0.7%. “Rates of 4%—and, in some cases, even
lower—create extremely attractive conditions for consumers,” says NAR Chief
Economist Lawrence Yun. “Buyers, for good reason, are anxious to purchase and
lock in at these rates.”
Consumer confidence about home buying
is increasing, which likely will translate to more sales over the
coming weeks, Yun says. “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,” Yun says. “Job creation and a rise in
inventory will nonetheless drive more buyers to enter the market.”
The need for more inventory is only
growing greater, Yun says. “Home builders have not ramped up
construction to the extent that is needed,” he says. “Homes are selling
swiftly, and more construction will help keep home prices manageable and,
thereby, allow more middle-class families to attain ownership opportunities.”
