Pending Home Sales Post Record-Setting Rebound in May
Following two consecutive months of declines, pending home sales came roaring back in May, the National Association of REALTORS® reported Monday. Every major region of the U.S. posted month-over-month increases, including the South, which also bested its levels from a year ago.
Home buyers reemerged, ready to move quickly on purchases as states reopened in May. “This has been a spectacular recovery for contract signings and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” says NAR Chief Economist Lawrence Yun. “This bounce-back also speaks to how the housing sector could lead the way for a broader economic recovery.”
NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—jumped 44.3% to a reading of 99.6, the highest month-over-month gain in the index’s history dating back to January 2001. An index of 100 is equal to the level of contract activity in 2001. However, overall contract signings are still down 5.1% year over year. “More listings are continuously appearing as the economy reopens, helping with inventory choices,” Yun says. “Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
Yun says the outlook for real estate has significantly improved over the last month. New-home sales are expected to move higher than a year ago, and annual existing-home sales are projected to fall by less than 10%. The more upbeat forecast comes “even after missing the spring buying season due to the pandemic lockdown,” Yun notes.
NAR is projecting that existing home sales will reach 4.93 million units in 2020 and that new-home sales will reach 690,000. “All figures light up in 2021 with positive GDP, employment, housing starts, and home sales,” Yun says. He also notes that in 2021, home sales are forecast to rise to 5.35 million units for existing homes and 800,000 for new homes.