An index of U.S. pending existing-home sales unexpectedly fell in May to the lowest level on record as elevated mortgage rates and high prices discouraged prospective buyers.
A gauge of contract signings from the National Association of Realtors decreased 2.1% to 70.8 last month, the lowest reading in data going back to 2001, the group said Thursday. The median estimate of economists surveyed by Bloomberg called for a 0.5% gain.
"The market is at an interesting point with
Closings on previously owned homes have been stuck near an annualized 4 million for more than a year, partly because of the so-called lock-in effect, whereby sellers are unwilling to list their homes and part with their current low mortgage rates.
Potential homebuyers are turned off by high selling prices, which hit a record $419,300 in May, although the market is gradually seeing a pickup in listings. On a call with reporters last week, Yun noted optimistically that the supply of existing homes was up more than 18% from a year ago.
"Let's wait to see if this leads to more home sales," he said.
Mortgage Rates
A sustained easing in borrowing costs would help support sales. The average 30-year fixed mortgage rate is hovering around 7%, more than twice as high as at the end of 2021. While many had hoped the Federal Reserve would begin cutting interest rates soon, inflation that's lingering above the Fed's 2% target has tied the central bank's hands.
Officials have penciled in just one reduction this year, down from the three cuts they
Among U.S. regions, the Northeast and West saw slight gains in May contract signings on previously owned homes, while the pending sales indexes for the South and Midwest each fell to their lowest levels since 2010.
The pendings-sales figures tend to be a leading indicator of sales of previously owned homes, because houses typically go under contract a month or two before they're sold.
