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Pending home sales, a measure of signed contracts on existing homes, rose slightly in May, up 0.7% compared with April, according to the National Association of Realtors.
That broke a six-month streak of declining demand. Sales were still 13.6% lower than May 2021.
Buyers have been contending with rising mortgage rates since the start of this year, but rates actually pulled back slightly in May, and that may account for the sales gain. More supply also came on the market, and total active inventory increased as well, as some homes sat on the market longer.
The average on the 30-year fixed mortgage hit a high of 5.64% in the first week of the month, but then fell to 5.25% by the end of the month, according to Mortgage News Daily. By mid-June it surged again to just over 6%.
“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” said Lawrence Yun, chief economist for the Realtors. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”
The supply of homes for sale has finally begun to rise, up 21% now from a year ago according to Realtor.com. It is still, however, about half of pre-covid levels. The median listing price last week was also up about 17% year over year, holding steady for the third straight week.
Regionally, pending home sales rose 15.4% in the Northeast compared to last month and were down 11.9% from May 2021. In the Midwest sales fell 1.7% for the month and were down 8.8% from a year ago.
In the South, sales increased 0.2% month to month and were down 13.8% year over year. Sales fell hardest in the West, where homes are priciest, down 5.0% for the month and down 19.8% from the year before.
“While interest rates slid during the month, the costs of financing a home purchase remained elevated,” said George Ratiu, manager of economic research at Realtor.com. “At the midpoint of 2022, real estate markets are mirroring an economy reaching for its post-pandemic reality.”