Pending Home Sales Dropped 2.1% in May; Northeast and West Record Gains

Pending home sales in May slipped 2.1%, according to the National Association of REALTORS® (NAR). The Midwest and South posted monthly losses in transactions, while the Northeast and West recorded gains. Year-over-year, all U.S. regions registered reductions.

This month follows the trend of last, when sales were down 7.7%. Year-over-year, pending transactions were down 6.6%. 

“The market is at an interesting point with rising inventory and lower demand,” said 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 homebuying, 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 Fed Funds rate.

The association forecasts that existing-home sales will rise to 4.26 million in 2024 (from 4.09 million 2023) and to 4.92 million in 2025 (from 2024). 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 (from 2024).

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 (from 2024). NAR forecasts increases in the median new home price to $434,100 in 2024 (from $428,600 in 2023) and $441,200 in 2025 (from 2024).

“The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices,” explained Yun. “In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices.”

Pending sales in the Northeast ascended 1.1% from last month, a decline of 2.3% from May 2023. The Midwest dropped 0.4% in May, down 5.6% from one year ago. The South lowered 5.5% in May, falling 10.4% from the prior year. The West increased 1.4% in May, down 2.1% from May 2023.

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