Expected home sales after a surprising increase in May

The sign for the sale of house real estate indicates that the home is “Under Contract” in Washington, DC.

Saul Loeb AFP | Getty Images

Upcoming home sales, a measure of signed contracts for existing homes, rose slightly in May, by 0.7% compared to April, according to the National Association of Real Estate Brokers.

This interrupted a six-month series of declining demand. Sales are still 13.6% lower than in May 2021.

Buyers have been struggling with rising mortgage rates since the beginning of this year, but the rates actually withdrew slightly in May, which may explain the profit from sales. More supply also appeared on the market, and total active inventory also increased as some homes stayed on the market longer.

The average value of the 30-year fixed mortgage peaked at 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 had risen again to just over 6%.

“Despite the small profit in the upcoming sales from the previous month, the housing market is clearly in transition,” said Lawrence Yun, chief economist for real estate agents. “Contract signatures are down significantly from a year ago due to much higher mortgage rates.”

The supply of homes for sale has finally started to grow by 21% now compared to a year ago, according to Realtor.com. However, it is still about half the levels before Covid. The average quotation price last week also rose by about 17% on an annual basis, remaining stable for the third consecutive week.

Regionally, upcoming home sales increased by 15.4% in the Northeast compared to last month and decreased by 11.9% compared to May 2021. In the Midwest, sales fell by 1.7% for the month and decreased by 8.8% compared to a year ago.

In the south, sales increased by 0.2% month on month and decreased by 13.8% on an annual basis. Sales fell the most in the West, where housing is the most expensive, by 5.0% for the month and 19.8% over the previous year.

“While interest rates fell during the month, the cost of financing a home purchase remained high,” said George Ratiu, economic research manager at Realtor.com. “In mid-2022, real estate markets reflect an economy reaching its post-pandemic reality.