Pending home sales rose in May both on a monthly and annual basis, reflecting a late-spring buying rush that may signal homebuyers’ acceptance of mid-6% mortgage rates as the new normal.
Contract signings increased 3.8% month over month and 4.8% year over year, according to the National Association of Realtors® Pending Home Sales report released Wednesday.
NAR Chief Economist Lawrence Yun said the data shows that elevated borrowing costs are not deterring buyers from coming off the sidelines even in the midst of geopolitical uncertainty.
“Going forward, falling oil prices will help lower mortgage rates,” predicted Yun. “But declines will be modest given sizable borrowing by the federal government and strong AI investment spending by tech companies.”
Notably, in May all four regions posted significant gains, with the most high-demand, low-supply areas emerging as the biggest winners.
Month-over-month pending home sales rose in the Northeast (8.7%), Midwest (8.1%), South (1%), and West (0.7%). Annually, contract signings climbed in the Midwest (9.3%), Northeast (6.1%), South (3.3%), and West (1.2%).
“The inventory-constrained Northeast region, which has seen faster home price growth but slower home sales for several months, is now showing more buyer contract signings,” said Yun. “More supply is needed to help moderate home price growth.”
At the metro level, Kansas City, MO (+20.1%); San Antonio (+15.7%); and Minneapolis(+13.9%) recorded the biggest year-over-year gains among the 50 largest markets.
Realtor.com senior economist Hannah Jones says the latest data from NAR suggests that despite mortgage rates climbing through the month, driven by the conflict in Iran and its accompanying oil shocks, buyers and sellers managed to find common ground thanks to easing home prices.
“The spring housing market has shown resilience in the face of rising rates,” says Jones. “Listing prices fell 2.4% in May, and the share of price reductions also declined. Together, these signals suggest sellers are pricing more realistically for today’s market, and buyers are responding.”
At the same time, active listing growth has stalled and time on market has leveled off near year-ago levels as the market absorbs fresh, well-priced inventory.
Looking ahead, Jones predicts that this summer’s market will hinge on whether buyers and sellers feel secure amid broader economic uncertainty. She notes that on the positive side, the economy added 172,000 jobs in May, a solid read on the labor market. Inflation, however, hit a three-year high as energy prices bled into other consumer categories.
“The recently announced ceasefire with Iran and agreement to reopen the Strait of Hormuz were felt almost immediately through lower oil prices,” adds Jones. “If that resolution holds and leads to lasting peace, inflation should ease, bringing mortgage rates, and with them, housing affordability, along for the ride.”
Metros with biggest pending home sale increases in April
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Kansas City, MO (+20.1%)
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San Antonio, TX (+15.7%)
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Minneapolis, MN (+13.9%)
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Miami, FL (+11.4%)
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Louisville, KY (+11.2%)
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Cincinnati, OH (+10.1%)
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Nashville, TN (+9.4%)
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Milwaukee, WI (+8.7%)
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Virginia Beach, VA (+8.2%)
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Richmond, VA (+8.2%)
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