Pending US house sales are up

July 2, 2019 12:11 pm

Pending US house sales are up in May 2019, the latest figures show.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.1% to 105.4 in May. They were up from 104.3 in April.

Pending home sales in the South also rose by 0.1% to an index of 124.1 in May. This is 0.7% higher than a year ago. That is according to the National Association of Realtors® data.

However, year-over-year contract signings declined 0.7%, marking the 17th straight month of annual decreases.

Why Pending US house sales are up

Lawrence Yun, NAR chief economist, says lower-than-usual mortgage rates have led to the increase in pending sales for May. “Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers. Buyers, for good reason, are anxious to purchase and lock in at these rates.”

Consumer confidence about home buying has risen, and Mr Yun expects more activity in the coming months.

“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,” he said. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”

Homes are selling swiftly

While contract signings and mortgage applications have increased, there is still a great need for more inventory, says Mr Yun. “Home builders have not ramped up construction to the extent that is needed. Homes are selling swiftly, and more construction will help keep home prices manageable and thereby allow more middle-class families to attain ownership opportunities.”

The Pending Home Sales Index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed. The sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically  about 20% of sales for existing-home sales. In developing the model for the index, it was shown that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the next two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.