After months of cooling, more Americans signed contracts to purchase homes in May. This is a remarkable rebound after months of cooling.
The National Association of Realtors’ index of home sales pending rose by 8% to 114.7 last month. This is the highest May reading since 2005. This is an increase of 106.2 from April. An index of 100 equals the level of contract activity for 2001.
With the country still in the grips of the coronavirus epidemic, contract signings are 13.1% higher than they were one-to-two years ago. This is the second month-overmonth increase in 2021, but it could be a sign of a strong end to the summer season.
There are plenty of buyers out there, but many have been driven from their homes by a lack of properties to sell. This, along with rising costs of materials, has caused home prices to soar.
The Commerce Department reported last week that new home sales fell for the second consecutive month. After a 7.8% decline in April, the May 5.9% drop was followed by a 5.9% increase in May. The median sale price for a new house in May was $374,400. This is 18.1% more than a year ago.
NAR reported last week that previously-occupied homes sales fell for the fourth consecutive month in May. Last month’s median sale price of an existing home was $350,000. This is a record-breaking figure and likely to be a problem for many potential home buyers, especially first-timers.
Chief economist at the NAR Lawrence Yun said that he expects more listings in 2021’s second half as homebuilding picks back up and federal mortgage forgiveness program winds down. Home buyers should not expect prices to drop too much despite lumber prices slightly falling.
Yun stated that “Home price growth will moderate with an increase in supply but a wide and prolonged fall in prices is unlikely.”
All four regions of the United States saw increases in contract signings over the previous month. The Northeast saw a 15.5% increase in May.