More Americans signed contracts to purchase homes in May, as pending home sales climbed to their highest level in more than nine years.
The National Association of Realtors reports that its seasonally adjusted pending home sales index rose 0.9 percent to 112.6 last month. The index has increased 10.4 percent over the past 12 months, putting it just below the April 2006 level — which was more than a year before the housing bust triggered the Great Recession.
Pending Home Sales Numbers Not Sustainable?
Strong sales and depressed inventory continue to push prices higher — perhaps too high, too fast. NAR chief economist Lawrence Yun says prices are now rising at an unhealthy and unsustainable pace.
Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages,” Yun added. “Without meaningful gains in new and existing supply, there’s no question the goalpost will move further away for many renters wanting to become homeowners.”
The steady job growth along with low but slowly rising mortgage rates has created greater urgency to buy homes. The gains reflect both a stronger economy but also the pressures to purchase a home before both prices and the cost of borrowing become potentially unaffordable.
Completed sales of existing homes jumped 5.1 percent last month to a seasonally adjusted annual rate of 5.35 million. Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.
Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
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