‘Buyer rush’ pushed pending sales up across the US in May 

Pending home sales were surprisingly strong in May, but it may be tough for the housing market to build momentum without tangible improvements in affordability.

Pending sales up across the country: Signed contracts were up 3.8% between April and May and up 4.8% year-over-year, according to the National Association of Realtors. Though well above the 1% increase some forecasters predicted, the rise was in line with Compass Chief Economist Mike Simonsen's weekly market research.

Month-over-month and year-over-year pending sales increases occurred across the U.S., NAR data showed. The Northeast experienced the biggest jump between April and May with an 8.7% increase, followed by the Midwest (up 8.1%), the South (up 1%) and the West (up 0.7%).

The latest pending sales data adds to a growing list of indicators suggesting that housing demand has firmed up this spring — and that homebuyers are proving more resilient than expected, with mortgage purchase applications also trending higher, noted Odeta Kushi, deputy chief economist at First American.

The May rise in pending sales is "particularly noteworthy," Kushi said, because "it has occurred despite mortgage rates moving higher through much of the spring."

NAR Chief Economist Lawrence Yun also acknowledged the past few months of mortgage rate fluctuations in his commentary about the May data. "A late spring buyer rush — even with mortgage rates not budging — is an indication of pent-up housing demand and consumers' acceptance of above-6% mortgage rates as the new normal," Yun said.

Strong headwinds persist: Persistently elevated mortgage rates and high prices continue to limit all but the highest-income buyers, making it tough to see much opportunity for sustained housing market momentum.

"The affordability challenge is accompanied by growing economic uncertainty and rising inflation," said Bright MLS Chief Economist Lisa Sturtevant, who noted that this uncertainty is slowing inventory growth as sellers hold back.

"Even in markets where there are ready buyers, there will be fewer options to choose from," Sturtevant said, "which will result in slower-than-expected transactions this summer." 

What happens with summer home sales may come down to whether widespread economic uncertainty and inflation fears dissipate. While a peace deal in the U.S.-Iran war was announced earlier this week, President Donald Trump has more recently warned that the U.S. will resume a bombing campaign "if they don't behave."

Consumer prices present another wildcard for housing. While inflation hit a three-year high in May, the rise was mostly driven by energy and food price shocks caused by the war in the Middle East. So far, these factors haven't had major impacts on core inflation.