Pending home sales climbed 5.9% in May to match a two-year high, a trade group said Wednesday. The National Association of Realtors said its pending-home-sales index rose to 101.1 in May from 95.5 in April. The index is 13.3% above May 2011 levels. May marked the highest level since the scheduled expiration of the home buyer tax credit in April 2010. A sale is listed as pending when the contract has been signed but the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001.
From the WSJ:
Maybe it wasn’t the weather.
For months, economists have mused over whether the surprisingly strong start to the spring housing market has come from an unseasonably warm winter that simply led buyers back into the market earlier than usual.
But Wednesday’s report on pending home sales shows that housing demand hasn’t eased heading into the traditional peak buying season, despite an early start to the spring, the economic storm clouds in Europe and a slower rate of job growth at home.
An index that measures the number of contracts signed to purchase previously owned homes rose in May to match its March level, the highest in nearly two years. Pending sales were up by 13.3% from last year, and up by 5.9% from April, according to the National Association of Realtors.
Contract activity hasn’t been a perfect indicator of future sales activity. Many buyers are unable to secure deals due to difficulties with loan approvals or low home appraisals. Also, many contracts are subject to bank approval because the home seller owes more than the home is worth.
As a result, someone who went under contract in March, only to see the deal fall apart, might have gone under contract on a separate home in May.
Still, May’s reading shows broad strength, helped by mortgage rates that continue to plumb record lows. Pending sales were up in every part of the country, up by 19.8% in the Northeast and 22.1% in the Midwest, compared with one year ago. Activity was up by 11.9% in the South and 4.8% in the West.
Right now, all the signs point to a housing market that “has hit bottom and started an upswing,” wrote Dean Baker, the housing economist who has long maintained a bearish outlook for housing, on Tuesday.