Pending home sales in May slid 2.1%, according to the National Association of Realtors (NAR). The Midwest and South posted monthly losses in transactions, while the Northeast and West noted increases. Compared with one year ago, pending home sales declined in all U.S. regions.
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—decreased to 70.8 in May. Year over year, pending transactions were down 6.6%. An index of 100 is equal to the level of contract activity in 2001.
Northeast PHSI rose 1.1% from April to 63.6, a decline of 2.3% from May 2023. The Midwest index fell 0.4% to 70.4 in May, down 5.6% from one year ago. The South PHSI dropped 5.5% to 83.7 in May, falling 10.4% from the prior year. The West index increased 1.4% in May to 56.7, down 2.1% from May 2023.
“The market is at an interesting point with rising inventory and lower demand,” says NAR chief economist Lawrence Yun. “Supply and demand movements suggest easing home price appreciation in upcoming months. Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”
NAR predicts mortgage rates will remain above 6% in 2024 and 2025, even with the Federal Reserve cuts to the federal funds rate. The association projects that existing-home sales will rise to 4.26 million in 2024 (from 4.09 million 2023) and to 4.92 million in 2025. Housing starts are expected to rise to 1.382 million in 2024 (from 1.413 million in 2023) and to 1.492 million in 2025.
NAR anticipates the median existing-home price will increase to a record annual high of $405,300 in 2024 (from $389,800 in 2023) and to $412,000 in 2025. NAR also forecasts increases in the median new-home price to $434,100 in 2024 (from $428,600 in 2023) and $441,200 in 2025.
“The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices,” adds Yun. “In the second half of 2024, look for moderately lower mortgage rates, higher home sales, and stabilizing home prices.”
