Pending Home Sales Jump In May; Drop YoY For 8th Month In A Row

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Pending home sales surged by 6.1% MoM in May; this is the largest jump since April 2010 (when first-time buyers scrambled to sign contracts before tax credits expired. However, exuberant spike aside, this is the 8th month in a row of a year-over-year drop in home sales. NAR is ever-optimistic suggesting "sales should exceed an annual pace of five million homes," amid low rates, inventory and job creation (goldilocks?). The sales, unsurprisingly, are all high-end: "The flourishing stock market the last few years has propelled sales in the higher price brackets," as lower-cost home sales plunge.

 

 

Lawrence Yun, NAR chief economist, expects improving home sales in the second half of the year. “Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” he said. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”

May’s 6.1 percent increase was the largest month-over-month gain since April 2010 (9.6 percent), when first-time home buyers rushed to sign purchase contracts before a popular tax credit program ended.

It's all high-end sales...

The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10 percent behind last year’s pace. Meanwhile, apartment rents are expected to rise 8 percent cumulatively over the next two years because of tight availability,” said Yun. “Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable.”

What happens if stocks don't keep rising?