Pending Home Sales Hit Highest Level In Nine Years In May
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The number of contracts signed to buy previously-owned homes rose again in May to reach its highest level in more than nine years, the National Association of Realtors said Monday.
NAR’s Pending Home Sales Index, which tracks contract signings (as opposed to closed sales), rose 0.9% in May to a level of 112.6. (An index of 100 represents an average level of contract activity.) That level was 10.4% higher than in May 2014, when the index stood at 101.9, and marks the ninth consecutive month of year-over-year gains. May’s index level is the highest since April 2006, when the measure stood at 113.7. May’s numbers fell in line with expectations of economists surveyed by Bloomberg ahead of the release.
“The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring,” said Lawrence Yun, NAR’s chief economist. “It’s very encouraging to now see a broad-based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive.” He also indicated that 2015 may be the best year for home sales since the recession.
However, a lack of supply continues to push prices higher at a rate that Yun considers unhealthy. Price increases have slowed compared to last year, rising 4.1% year-over-year in March, the latest report from S&P/Case-Shiller. But Selma Hepp, Trulia’s new chief economist, predicts that prices could rise at much faster rates by year’s end. Evidence in support of that prediction: the median existing-home sales price was up 8.9% year-over-year in April and7.9% year-over-year in May, according to the National Association of Realtors.
The continued rise in pending sales does suggest a healthy demand for homes. Pending sales are considered a more timely gauge of the market than other reports because they are forward-looking, based on contracts signed as opposed to closed transactions. (Closings generally come one to two months after a contract is signed.)
Taken together, reports released in June suggest a housing market with plenty of appetite and not enough supply, though builders are stepping up to meet the growing demand. Groundbreakings on new homes fell 11.1% in May compared to April but building permits hit a new eight-year high. Tomorrow S&P/Case-Shiller will release its data on how prices for single-family homes are moving. The volatile new home sales report jumped 19.5% year-over-year in May, a 2.2% tick-up from the prior month. Sales of previously-owned homes hit their fastest pace in nearly six years in May, driving prices up by 7.9% year-over-year.
“Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages,” Yun noted. “Without meaningful gains in new and existing supply, there’s no question the goalpost will move further away for many renters wanting to become homeowners.”
Pending home sales in May rose on a year-over-year basis in all regions across the country, but were down on a monthly basis in the Midwest and South. The index tracking pending contracts in the Northeast rose 6.3% in May from April to 93.9, while the Midwest index fell 0.6% in to 111.4. The Southern index fell 0.8% to 127.8, while the Western region’s index rose 2.2% in to 104.5.
On a year-over-year basis, all regions of the United States increased contract signings in May: the Northeast by 10.6%, Midwest by 7.8%, South by 10.6%, and West by 13%.
The national median sales price for existing, or previously-owned, homes for 2014 rose 5.7% to $208,100, well below the rapid, 11.5% gain seen in 2013. NAR has bumped up its forecast for the change in national median existing-home prices for 2015 to 6.7%. Total existing-home sales for 2015 are forecast to be around 5.24 million, or about 6.1% above 2014. Last year sales finished 2.9% below 2013 levels (5.1 million) at 4.94 million.
