WASHINGTON (Reuters) – The number of contracts to buy existing U.S. homes unexpectedly fell in May, suggesting sales may remain sluggish for some time as would-be buyers grapple with rising mortgage rates and prices.
The National Association of Realtors said Thursday that its Pending Home Sales Index fell 2.1% last month to 70.8. The index fell in the densely populated South and the more affordable Midwest. It rose in the Northeast and West.
Economists polled by Reuters had expected a 2.5 percent rebound in deals to sell in the next one to two months. Pending home sales fell 6.6 percent in May from a year earlier.
“The market is in an interesting spot with rising inventory and declining demand,” said Lawrence Yun, chief economist for the National Association of Realtors.
The housing market was hit by a resurgence in mortgage rates, causing home sales and home construction to fall in May.
Residential investment is expected to slow in the second quarter after recording double-digit growth in the first quarter.
The average interest rate on the popular 30-year fixed-rate mortgage hit a six-month high of 7.22% in early May before dropping to 7.03% by the end of the month, according to data from mortgage lender Freddie Mac, before falling to an average of 6.87% in the week ending June 20.
“While the first half of the year did not meet expectations in terms of home sales, it exceeded expectations in terms of home prices,” Yoon said. “In the second half of 2024, we can expect to see a gradual decline in mortgage rates, increased home sales and stabilization of home prices.”
(Reporting by Lucia Mutikani and Andrea Ricci Editing by
