Pending home sales leapt in May, posting the largest month-over-month gain in more than four years and the latest sign the U.S. housing sector’s key spring selling season is performing well.
The National Association of Realtors’ pending home sales index, a forward-looking indicator based on contract signings, climbed 6.1% in May. That increase was the largest gain the association reported since April 2010, when first-time home buyers rushed to sign contracts before a tax credit program ended.
The housing sector suffered a mixed performance earlier this year, which many attributed to the severe winter weather. But housing data for May has signaled an upswing in demand, important for the sector as it progresses into the key spring and summer home-buying season. The Commerce Department earlier this month reported new home sales jumped a better-than-expected 19% in May from the prior month.
Lawrence Yun, the National Association of Realtors chief economist, said he expects home sales will improve in the second half of 2014. But he warned second-half sales growth wouldn’t be enough to compensate for the sluggish first quarter, and thus will likely fall below last year’s total.
Yun and other housing sector observers say there are still some problematic trends that limit the industry’s rebound. Some worries include a reluctance by lenders to approve mortgage applications for lower qualified buyers, as well as low participation from first-time homebuyers.
“Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable,” Yun said.