Signed contracts to buy previously owned homes rose to the highest level in six years, according to figures released on Thursday, and rising interest rates may be causing some buyers on the fence to get in quickly before they are priced out.
The Pending Home Sales Index from the National Association of Realtors rose 6.7 percent in May from April, and is now up 12.1 percent from a year ago. A shortage of homes for sale has weighed on the market this year, even as demand increases. Contracts to buy new homes rose to a five-year high in May, according to the U.S. Census.
"Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher," said Lawrence Yun, chief economist for the Realtors.
"This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."
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The average rate on the 30-year fixed conforming mortgage is up about 100 basis points from the beginning of May to around 4.5 percent. The rate spiked the most in the past week, before these May contracts were signed.
Pending sales were highest in the West, where prices jumped the highest.
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The index was unchanged in the Northeast in May month-to-month, but was 14.3 percent higher from a year ago. In the Midwest, sales jumped 10.2 percent monthly and were 22.2 percent higher than in May 2012. The South saw a 2.8 percent monthly gain, and is 12.3 percent above a year ago. The index in the West rose 16 percent monthly but is just 1.1 percent higher than it was a year ago, due to limited inventory.
Earlier this week, the latest data showed that U.S. home prices went through the roof in April, posting their biggest monthly gain in seven years.
"The recovery is definitely broad based," said David Blitzer of S&P Dow Jones, which released the latest S&P/Case-Shiller Home Price Indices, showing that from March to April, home prices gained 2.6 percent in the top ten U.S. housing market and 2.5 percent in the top 20 market.