Photo: James Bombales
While other sectors of the US economy have been decimated by the COVID-19 pandemic, the housing market has seemingly recovered in barely any time at all, thanks in part to ultra-low mortgage rates. Pending home sales, a predictor of future closings, climbed 44.3 percent from April to May, according to the National Association of Realtors’ latest index figures.
It was the highest month-over-month increase on record since the Pending Home Sales Index (PHSI) began in 2001. An index of 100 represents the average level of contract-signing activity in 2001. During the month of May, the index rose to 99.6.
On a year-over-year basis, contract signings were still down 5.1 percent, but the housing market has improved by leaps and bounds since bottoming out in April.
“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
All four regions of the country showed signs of improvement in May. In the Northeast, the PHSI rose 44.4 percent to 61.5, a 33.2 percent drop over 2019 levels. The Midwest index increased 37.2 percent to 98.8, an impressive performance that was down only 1.4 percent compared to the same period last year.
The South saw pending home sales jump 43.3 percent to 125.5, a 1.9 percent uptick from May 2019. And finally, the West recorded an index boost of 56.2 percent to 89.2, a slight 2.5 percent decline from a year earlier.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown,” Yun said.
NAR predicts there will be 690,000 new construction home sales and 4.93 million existing-home sales in 2020, compared to the 682,000 new construction homes and 5.34 million existing homes sold in 2019. If economic activity continues to recover, the housing market could see sales of 5.35 million units for existing homes and 800,000 for new homes by 2021.