Pending home sales in the U.S. increased by 3.8% month-over-month and 4.8% year-over-year in May, surpassing expectations. This growth occurred despite rising mortgage rates, attributed to better mortgage spreads and healthier inventory levels compared to recent years.
The unexpected rise in pending home sales, despite higher mortgage rates, indicates resilience in the housing market. This suggests that factors like improved mortgage spreads and more balanced inventory levels are currently outweighing the impact of increased borrowing costs for potential buyers.
Pending home sales in the U.S. saw a notable increase in May, rising 3.8% from the previous month and 4.8% compared to the same period last year, according to the National Association of REALTORS®. This growth occurred across all major regions of the country, including the Northeast, Midwest, South, and West.
The positive trend defied expectations for some observers who anticipated a decline in sales due to rising mortgage rates. However, the report suggests that current mortgage rates have remained below the critical 7% threshold this year, largely due to improved mortgage spreads. This has kept rates closer to the 6% range, a level historically associated with improved housing demand.
Furthermore, the analysis points to healthier inventory levels compared to the severely constrained market of 2020-2023. This moderation in inventory has cooled price growth, allowing wages to outpace home price increases, a significant factor for the long-term health of the housing market.