Big Jump in May Pending Home Sales!
National Association of Realtors® reported a record comeback in May for Pending home sales nationwide after two previous months of declines brought on by the coronavirus pandemic. The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, saw its highest-ever gain of 44.3% to 99.6 in May for the whole nation. An index of 100 is equal to the level of contract activity in 2001, which was when this data series was begun. Compared to May 2019, however, contract signings fell 5.1%, so there is room for further gains in the coming months. This strength beat expectations after two months of slowing sales; California Association of Realtors® reported the state’s May home sales, a backward-looking statistic, saw a 41.4% drop in transactions from the previous year, reflecting the low pending sales rates in March and April. It was the biggest year-over-year decrease since November 2007.
Regionally, the strongest pending sales was seen in the West, where it jumped 56.2% in May to 89.2, down just 2.5% from a year ago. The Northeast saw 44.4% growth to 61.5 in May, although it was still down 33.2% from a year ago. In the Midwest, the index rose 37.2% to 98.8 last month, down 1.4% from May 2019. Pending home sales in the South increased 43.3% to an index of 125.5 in May, up 1.9% from May 2019.
“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
“More listings are continuously appearing as the economy reopens, helping with inventory choices,” Yun said. “Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
According to data from realtor.com®, among the largest metro areas, active listings were up by more than 10% in May compared to April in several metro areas, including Urban Honolulu, Hawaii; San Francisco, Calif.; San Jose, Calif.; Denver, Colo.; and Colorado Springs, Colo.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown,” Yun said.
NAR now expects existing-home sales to reach 4.93 million units in 2020 and new home sales to hit 690,000. “All figures light up in 2021 with positive GDP, employment, housing starts and home sales.” Yun noted that in 2021, sales are forecast to rise to 5.35 million units for existing homes and 800,000 for new homes.