Pending homes sales jump in May to highest in more than 6 years
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New contracts for homes rose to their highest level in more than six years last month, a positive sign as the resurgent housing market faces higher interest rates.
The National Assn. of Realtors said Thursday its Pending Home Sales Index jumped 6.7% in May from a month earlier and is 12.1% higher over the year. The index represents contracts signed, but not closed.
Home buyers looking to scoop up a home before interest rates rise could account for the significant increase in pending sales, Lawrence Yun, the association’s chief economist, said.
Low interest rates and tight inventory have kick-started a housing recovery, helping home buyers escape negative equity positions and spurring builders into action.
Southern California’s housing recovery: An interactive map
As interest rates rise, more prospective home shoppers could be motivated in the short term to cash in before mortgage rates go higher, although in the long run higher rates makes housing more expensive.
Freddie Mac said Thursday that the average rate for a 30-year fixed mortgage this week hit 4.46%, a rise from 3.93% last week, although still low by historic standards.
The Realtor group said its pending home sale index reached 112.3 in May, the highest since December 2006. A reading of 100 is equal to average contract activity in 2001, which is considered a year with a normal level of homes sales.
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