Pending home sales unexpectedly fell in May, hitting an all-time low.
NAR’s Pending Home Sales Index fell by 2.1% month-over-month to a reading of 70.8 last month, its lowest level on record. An index of 100 is equal to the level of contract activity in 2001.
Year-over-year, sales were down 6.6%.
The drop came as a surprise, as economists surveyed by Bloomberg had predicted a 0.5% gain.
All four regions posted YOY declines. On a monthly basis, however, the Midwest and South saw transactions fall, while the Northeast and West recorded gains.
NAR Chief Economist Lawrence Yun painted an optimistic picture despite the data, noting that home prices should ease in the coming months, giving homebuyers struggling with affordability some breathing room.
“The market is at an interesting point with rising inventory and lower demand,” he said. “Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”
Some price adjustments are already underway. The typical U.S. home sold for under asking price in the last four weeks, the first time that’s happened since the onset of the pandemic. Almost 7% of sellers dropped their asking price in the same period. Though most sellers are still making a profit, the trend reflects a changing landscape in the housing market.
Rate lock-in and high home prices are the primary drivers behind low buyer activity, but Redfin recently noted that record-breaking heat may also play a role.
“I’ve heard some clients say, ‘It’s so hot outside I don’t want to see anything,’” said Joe Hunt, a Redfin manager in Phoenix. “But if mortgage rates were lower, I doubt heat would be keeping buyers away.”
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