Pending home sales increased in May, ending a six-month streak of declines, according to the National Association of Realtors (NAR).
According to NAR’s Pending Home Sales Index (PHSI), pending homes sales increased month-over-month in May in both the Northeast and the South. They decreased in the Midwest and the West.
For May, the PHSI increased 0.7 percent to 99.9, NAR reported. However, year-over-year transactions decreased in all regions. Year-over-year, transactions dropped 13.6 percent.
“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” NAR Chief Economist Lawrence Yun said in a release. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”
The index revealed the average monthly mortgage payment has increased by about $800 since the beginning of the year as mortgage rates have climbed by 2.5 percent since January.
“Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy,” Yun said. “The better way to balance the market is through increased supply, which also helps the broader economy.”
Yun said variations in home prices and affordability contributed to the regional differences in pending sales activity in May.
“The largest decline in contract activity was observed in the West region, where homes are the most expensive,” he said. “This further indicates the growing need to increase supply to tame home price growth and improve the chances of ownership for potential home buyers.”
The Northeast PHSI jumped 15.4 percent to 86.7, down 11.9 percent from May 2021. The Midwest index dropped 1.7 percent to 98.6 in May, a decline of 8.8 percent from a year ago. The South PHSI increased 0.2 percent to 119 in May, a 13.8 percent drop from the previous year. The West index decreased 5 percent in May to 81.6, down 19.8 percent from the prior year.