Rising mortgage rates continued to dampen homebuyer activity in May, NAR reported. As inventory builds in the coming months, home price growth will slow and more buyers may flood the market.
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The National Association of Realtors (NAR) reported Thursday that pending home sales fell 2.1% in May as homebuyers continued to resist higher mortgage rates.
The Pending Home Sales Index (PHSI) weakened to 70.8 in May, with homes for sale down 6.6% year-on-year. Index 100 represents the level of contract activity in 2001.
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NAR chief economist Lawrence Yun said in a statement that current market conditions suggest inventory should build in the coming months, leading to slower home price growth and the potential for an influx of more buyers. market.
“The market is at an interesting moment, with inventories rising and demand falling,” Yun said. “Supply and demand trends suggest home price appreciation will slow in the coming months. Inevitably, in a job-creating economy, more inventory will lead to more home purchases, especially as mortgage rates fall.
By region, the Western PHSI was the most resilient at 56.7. The index increased by 1.4% month-on-month and decreased by 2.1% from May 2023.
The PHSI in Northeast China was 63.6, up 1.1% from the previous quarter and down 2.3% from the same period last year.
In the Midwest, the index fell 0.4% to 70.4, down 5.6% from May 2023.
The PHSI in the south dropped 5.5% month-on-month to 83.7, a year-on-year decrease of 10.4%.
The association also forecasts several market indicators for the coming years.
NAR reports that the association expects mortgage rates to remain high above 6% through 2025, even with a cut in the federal funds rate.
NAR expects existing home sales to increase from 4.09 million units in 2023 to 4.26 million units in 2024 and to 4.92 million units in 2024. Thousands of sets.
NAR estimates that the median existing home sales price could reach an all-time high of $405,300 in 2024 and rise to $412,000 in 2025. The association projects the median price of a new home will reach $434,100 in 2024 (up from $428,600 in 2023) and $441,200 in 2025.
“Housing sales in the first half of the year did not meet expectations, but housing prices exceeded expectations,” Yun said. “Mortgage rates will moderately lower in the second half of 2024, home sales will increase and home prices will stabilize.”
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