Pending Home Sales: Sticker Shock Shock?

Political News

Today’s Capital Note includes a discussion about the rise in home prices — bubble or not and so on. It was written last night, and one of the things I wrote in that long-vanished era was this:

[T]here may be some signs of sticker shock.

The New York Times (from a week or so ago):

“Sales of homes in the United States fell for the fourth consecutive month in May as a sharp rise in prices and a shortage of houses for sale led to a slowdown in the market.

Existing home sales fell 0.9 percent in May from April, the National Association of Realtors said Tuesday, with the median sales price climbing nearly 24 percent from a year earlier to a record $350,300.”

But now (via CNBC):

The pandemic-induced housing boom may not be over quite yet. Despite recent months of softening sales, buyers came back remarkably strongly in May.

Pending home sales, a measure of signed contracts on existing homes, jumped an unexpectedly high 8% in May compared with April, according to the National Association of Realtors. Analysts expected a 1% drop. This is the highest level of sales activity for May since 2005.

Sales were up 13% from May 2020, when the housing market was just beginning to come back from the coronavirus lockdown. Pending contracts are a forward-looking indicator of closed home sales.

“May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”

On the other hand:

Weekly mortgage demand is falling, down nearly 7% on the week, according to the Mortgage Bankers Association — a sign that the housing boom might be starting to fizzle . . .

Let’s see.

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