Contract signings hit record low in May 

Contract signings nationwide just dropped to a record low last month, data from the National Association of Realtors show. 

The trade group’s pending home sales index, which predicts home sales based on contract signings, dipped 2.1 percent from April, marking the metric’s second consecutive monthly decline, according to a report published by the organization on Thursday.

The index is measured on a scale where 100 is equal to the number of contract signings in 2001, the year NAR began collecting this data. In May, the PHSI was 70.8, which means contract activity was roughly 30 percent below levels recorded in the base year. On an annual basis, contract activity was down nearly 7 percent.

The index fell short of economists’ expectations and notched an “all-time record low,” Nerdwallet’s home buying and mortgage writer, Kate Wood, wrote in a statement.

She added that home buyers are stuck on the sidelines, as mortgage rates and home prices remain high and sparse inventory continues. 

Pending transactions dropped month-over-month in the Midwest and South, while it ticked up in the Northeast and West. All regions across the U.S. recorded annual declines. 

While contract activity bottomed-out last month, home prices reached new heights. The nationwide sale price broke the record in May when it was $419,300, which was up 6 percent compared to the same period last year, according to NAR and reported by Bankrate.

The growth in home price outpaced forecasters’ predictions, NAR’s chief economist Lawrence Yun wrote in a press release. The organization expects home prices to set a record annual high by the end of 2024. 

Closed transactions fell in May on an annual basis, dropping nearly 3 percent compared to the same month last year. The number of homes on the market last month rose 7 percent compared to April. 

“Housing inventory is rising, albeit from very low levels,” Bob Broeksmit, CEO and president of the Mortgage Bankers Association, wrote in a statement. 

He added that mortgage rates have now fallen below 7 percent, which he considers “good news for prospective buyers — especially those with children — looking to move before the school year begins.”

NAR expects mortgage rates to stay above 6 percent for the remainder of the year and heading into 2025, even if the Federal Reserve cuts interest rates. 

“Supply and demand movements suggest easing home price appreciation in upcoming months,” Yun wrote in the release. “Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”

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