Pending home sales tick up, snapping a string of dismal housing market reports

After a string of dismal reports on the housing market, the real estate industry is getting a much-needed glimmer of hope.

The Pending Home Sales Index (PHSI) from the National Association of Realtors (NAR) ticked up to a reading of 72.6 in May, a rise of 1.8% compared to April and up 1.1% year over year. The jump was buoyed by monthly growth in all four regions of the country.

An index reading of 100 indicates levels from 2001.

But the numbers come with a caveat as the index has been volatile of late. April’s PHSI represented the largest monthly drop (-6.3%) since September 2022, and in March, the index posted its high monthly increase (+6.1%) since December 2023.

“Even this modest increase in pending home sales is a welcome sign for a beleaguered housing market, as the May uptick followed a large dip in April, despite a steady upward trend in mortgage rates,” First American deputy chief economist Odeta Kushi said in a statement.

“The 2025 home-buying season may yet show some signs of life, as purchase mortgage applications — a separate leading indicator of housing activity — have also registered modest gains in May and June.”

Regionally, the West posted the strongest monthly gain in the PHSI, rising 6% to a reading of 56.5, although it’s down 1.2% year over year. The South, which accounts for the bulk of home sales, rose 2% annually to 86.7, the highest index reading among the four regions.

The Midwest registered a reading of 73.7, up 2.6% year over year, while the Northeast saw a 2.1% monthly increase to 63.4.

The positive signals in pending home sales is overshadowed by other housing market reports. New-home sales in the South crashed in May, pulling overall sales down by a whopping 13.6% on a monthly basis.

Existing-home sales weren’t much better. Despite inventory being up 20.3% year over year, they clocked in at a seasonally adjusted annual rate of 4.03 million, the slowest clip for the month of May since 2009.

“Consistent job gains and rising wages are modestly helping the housing market,” NAR chief economist Lawrence Yun said in a statement. “Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains.”