The housing market continues to recover from a weak start to the year. After slumping in the winter months, pending home sales in the United States posted their third consecutive monthly gain in May and reached their best level in four years.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, surged 6.1 percent to 103.9 in May from an upwardly revised 97.9 in April, according to the latest report from the National Association of Realtors. On average, economists expected sales to gain about 1.5 percent. It was the largest monthly jump since April 2010, when first-time homebuyers received a tax incentive to purchase a house. However, sales are still 5.2 percent below the May 2013 level of 109.6.
Home sales should continue to improve in the upcoming months, but annual sales will likely decline compared to 2013. “Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” said Lawrence Yun, the National Association of Realtors’ chief economist, in a press release. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”
Sales were higher in all major regions of the country. The Pending Home Sales Index increased 8.8 percent in the Northeast to 86.3 in May and is slightly above last year’s level. The Midwest index gained 6.3 percent to 105.4 percent. Meanwhile, sales in the South and West advanced 4.4 percent and 7.6 percent, respectively.
The National Association of Realtors expects existing-home sales this year to total around 4.95 million units, which is slightly below the nearly 5.1 million recorded last year. They are expected to reach almost 5.3 million in 2015. Housing starts are projected to rise almost 19 percent in 2014 and reach about 1.1 million, closer to the underlying demand of 1.5 million. The national median existing-home price is expected to rise at a more reasonable range of 5 to 6 percent in 2014 and grow another 4 to 5 percent in 2015.
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