Pending home sales in the United States unexpectedly rose in May, according to the National Association of Realtors (NAR). This is the biggest surge of completed contracts made to purchase previously owned homes in 11 months. This increase in pending home sales is likely because of a huge uptick in listings — especially when compared to earlier this year — as well as a decline in mortgage rates.
Contracts signed in May rose by 8.0%. This is highly unexpected, as many analysts assumed that pending home sales would decrease for the month. The housing market has been plagued by many issues, and most didn’t think sales would increase because of these issues. However, the complete opposite seems to have happened. When compared to one year ago, pending home sales are up by 13.1%.
Pending home sales do not signal that homes have actually been sold… yet. Many economists, however, look at these numbers monthly to get a better understanding of what the housing market will look like in the near future. Most of these pending home sales will eventually become sales one or two months after the initial contract is signed. Therefore, economists survey these numbers to get an indicator of what the health of the housing marketing looks like, or will soon look like.
This latest increase is positive for the housing market and the economy as a whole, as it could help increase overall home sales on the market. For the past many months, property prices have surged to record highs. Plus, the number of homes listed for sale has been quite low when compared to the number of people looking to buy property. Therefore, this has only continued to increase the price of homes, as many end up paying more in order to outbid others.
The shortage of homes on the market has really been detrimental to the housing marketing as a whole, as this has affected new and existing home sales. New homes have surged in price as well because of raw material shortages that have put a hamper on the production of these homes. The limited supply of homes on the market, as well as the surge in the price of raw materials, has resulted in both new and old homes rising in price.
However, it does appear that more homes have recently been listed, which may have been a huge factor in why the pending home sales rate has surged. NAR data reveals that the inventory of existing homes surged to its highest since last October in May.
Unfortunately, this latest positive news doesn’t signal that overall home prices will go down anytime soon. While the price of property will steadily become moderate with more listings to give buyers options to choose from, a huge decrease in price more than likely will not happen. However, these somewhat lower prices as well as the increase in listings may help previously outbid buyers find new homes in the upcoming months, which will be very beneficial for the housing market.