After a minor dip in April, pending home sales rebounded in May, mainly driven by the lower mortgage rates.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI rose 1.1% from 104.3 in April to 105.4 in May, but was still 0.7% below the level one year ago, marking the seventeenth straight month of declines on an annualized basis.
Regionally, three of the four major regions saw an increase in the PHSI. The PHSI in the Northeast, Midwest and South grew 3.5%, 3.6% and 0.1% in May, while sales in the West fell 1.8%. Year-over-year, the PHSI in the South rose 0.7%, while sales in the Northeast, Midwest and West declined 0.5%, 1.2% and 3.1%, respectively.
According to the NAR, declining mortgage rates are the major driver of May gains. Consumer confidence, released earlier this week, shows more households are planning to buy a home within six months. NAR expects sales will continue to grow in the comings months.
Moderate home prices and an increase in inventory also provide favorable conditions to the housing market. The Case-Shiller U.S. National Home Price Index continued to see a slow growth pace in April. Meanwhile, higher inventory levels help to stabilize home price appreciation and to achieve higher homeownership rates.