Inspired by lower mortgage rates and a better selection of homes for sale, homebuyers streamed into the market in May.
Pending home sales rose sharply in May, with lower mortgage rates and increased inventory accelerating the market. All four regions of the country saw increases in pending sales, with the Northeast and West experiencing the largest gains, data from the NATIONAL ASSOCIATION OF REALTORS® show.
NAR’s Pending Home Sales Index shows home sale contract signings increased 6.1% in May, the largest month-over-month gain since April 2010 when first-time homebuyers were rushing to buy before a popular federal tax credit ended.
Home sales will continue to pick up in the second half of the year, predicts to NAR Chief Economist Lawrence Yun. “Sales should exceed an annual pace of 5 million homes in some of the upcoming months behind favorable mortgage rates, more inventory, and improved job creation,” he said. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”
Despite the positive gains in signed contracts last month, Yun cautions that affordability and access to mortgage credit are still areas of concern for first-time homebuyers, who accounted for only 2% of existing-home sales in May and typically carry student loan debt and lower credit scores.
“The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10% behind last year’s pace. Meanwhile, apartment rents are expected to rise 8% cumulatively over the next two years because of tight availability,” said Yun. “Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable.”
Yun expects existing-homes sales to be down 2.8% this year to 4.95 million, compared with 5.1 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5% and 6% this year and in the range of 4% to 5% in 2015.
Pending Home Sales by Region
May 2014 Compared with May 2013
National Up 6.1% Down 5.2%
Northeast Up 8.8% Up 0.2%
Midwest Up 6.3% Down 6.6%
South Up 4.4% Down 2.9%
West Up 7.6% Down 11.1%
And, to top this off… Homeownership is still the American Dream!