Decline in Pending Home Sales for May

 

The decline in Pending Home Sales for May

The National Association of REALTORS® (NAR) reports a 2.1% decline in pending home sales for May. While the Midwest and South saw transaction drops, the Northeast and West experienced increases. Year-over-year, every U.S. region recorded declines.

The Pending Home Sales Index (PHSI), which anticipates future home sales based on contract signings, fell to 70.8 in May, marking a 6.6% decrease from the previous year. The PHSI uses a base index of 100, representing the contract activity level in 2001.

NAR Chief Economist Lawrence Yun noted, “The market is at an interesting point with rising inventory and lower demand. These shifts suggest a potential slowdown in home price growth in the coming months. Increased inventory in a job-creating economy will eventually lead to more home buying, especially as mortgage rates decrease.”

Economic Predictions for the U.S. Housing Market

NAR predicts that mortgage rates will stay above 6% in both 2024 and 2025, despite expected cuts to the Fed Funds rate by the Federal Reserve.

Projections indicate that existing-home sales will climb to 4.26 million in 2024 from 4.09 million in 2023 and further increase to 4.92 million in 2025. Housing starts are anticipated to rise to 1.382 million in 2024 and to 1.492 million in 2025.

The median price of existing homes is expected to hit an annual high of $405,300 in 2024, up from $389,800 in 2023, and to reach $412,000 in 2025. The median price for new homes is forecasted to increase to $434,100 in 2024 and to $441,200 in 2025.

Yun commented, “The first half of the year underperformed in terms of home sales but exceeded expectations for home prices. For the latter half of 2024, expect slightly lower mortgage rates, increased home sales, and stable home prices.”

Regional Breakdown of Pending Home Sales

• Northeast: The PHSI rose by 1.1% from last month to 63.6, a 2.3% decline from May 2023.
• Midwest: The index fell by 0.4% to 70.4 in May, a 5.6% decrease from the previous year.
• South: The PHSI dropped by 5.5% to 83.7, down 10.4% year-over-year.
• West: The index increased by 1.4% in May to 56.7, a 2.1% decline from May 2023.

About the National Association of REALTORS®

The National Association of REALTORS® is the largest trade association in the U.S., representing 1.5 million members involved in various aspects of the residential and commercial real estate industries. The term REALTOR® identifies a real estate professional who is a member of the NAR and adheres to its strict Code of Ethics.

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Note: The Pending Home Sales Index is an early indicator for the housing sector, based on the number of existing homes under contract but not yet closed. The index, which is based on about 40% of multiple listing service data each month, aligns closely with the level of closed existing-home sales in the following two months. An index of 100 is equivalent to the average contract activity level in 2001.

The NAR will release the Existing-Home Sales data for June on July 23, and the next Pending Home Sales Index on June 31. All releases are scheduled for 10 a.m. Eastern time. For more information, view the NAR Statistical News Release Schedule.

(Sources: National Association of Realtors)