Pending home sales unexpectedly broke a six-month streak of declines in May, climbing 0.7% to a reading of 99.9, according to the National Association of Realtors.
Economists surveyed by Refinitiv were expecting a decline of 3.7%. An index of 100 is equal to the level of contract activity in 2001.
On a regional basis, contract signings jumped 15.4% month over month in the Northeast, increased 0.2% month over month in the South, fell 1.7% month over month in the Midwest and contracted 5% in the Midwest. The figures mark year-over-year declines of 11.9%, 13.8%, 8.8% and 19.8%, respectively.
Despite May's small gain in pending sales, NAR chief economist Lawrence Yun warns that the housing market is "clearly undergoing a transition." Contract signings fell 13.6% on a year-over-year basis in May, which Yun attributed to "much higher mortgage rates."
The average commitment rate for a 30-year, fixed-rate mortgage hit 5.81% last week, the highest level since November 2008.
According to NAR, at the median single-family home price and with a 10% down payment, the monthly mortgage payment has increased by about $800 since the beginning of the year as mortgage rates have climbed by 2.5 percentage points since January.
"Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy," Yun added. "The better way to balance the market is through increased supply, which also helps the broader economy."
In May, sales of new family homes were sold at a seasonally adjusted annual rate of 696,000 in May, up 10.7% compared to April's revision of 629,000 but below May 2021's estimate of 740,000, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
The median sales price of new houses sold in May 2022 was $449,000, while the average sales price was $511,400. The seasonally‐adjusted estimate of new houses for sale at the end of May was 444,000, representing a supply of 7.7 months at the current sales rate.
Meanwhile, existing home sales fell to seasonally adjusted annual rate of 5.41 million in May, down 3.4% from the previous month. On a year-over-year basis, existing home sales receded 8.6%. The median existing home price for all housing types in May was $407,600, up 14.8% from May 2021, as prices increased in all regions.
Total housing inventory was at 1.16 million units as of the end of May, up 12.6% from April but down 4.1% compared with the previous year. Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.