SILVER SPRING, MARYLAND—(BUSINESS WIRE)— In May, more Americans signed contracts to buy homes, a surprising turnaround following months of cooling in the housing market, which has seen prices hit record highs due to a lack of availability. Last month, the National Association of Realtors’ index of pending home sales increased by 8% to 114.7, the highest level for May since 2005. This is an increase from 106.2 in April. The level of contract activity in 2001 is represented by a score of 100.
Contract signings, which are used as a predictor of purchases in the next one to two months, are 13.1 percent higher than they were a year ago, when the country was still dealing with the coronavirus pandemic. It’s only the second month-over-month gain in 2021, but it could portend a good summer season conclusion. While there are plenty of buyers in the market, many have been forced out due to a scarcity of available properties, which, along with rising material costs, has pushed new and existing home prices to new highs. The Commerce Department reported this week that new home sales declined for the second month in a row. After a 7.8% drop in April, the 5.9% drop in May was a welcome relief. In May, the median price of a new home sold was US$374,400, up 18.1 percent from the previous month. Last week, the National Association of Realtors announced that sales of previously owned houses declined for the fourth month in a row in May. Last month, the median sales price for an existing home surpassed $350,000, a new high that is expected to deter many would-be home buyers, particularly first-timers.
As homebuilding picks up and the federal mortgage forbearance program winds down, Lawrence Yun, the NAR’s chief economist, expects to see more listings in the second half of 2021. Even with the minor drop in lumber prices, home buyers shouldn’t expect much of a drop in prices. “With increasing supply, home price rise will gradually reduce, but a broad and sustained price reduction is improbable,” Yun added. Contract signings increased in each of the four major U.S. regions from the previous month, with the Northeast up 15.5 percent in May./nRead More