The index reached 72.6 in May. Not only was that an increase over April, but also a 1.1% increase over May 2024. However, overall homebuying activity remains soft. Mortgage rates hovering near 7% and persistently high home prices continue to weigh on buyers heading into the summer, according to Odeta Kushi, deputy chief economist at First American.
“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,” Kushi said. “The 2025 homebuying 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.”
Regional data shows varied challenges
Buyers signed more contracts across every major U.S. region in May. The West led with a 6% monthly increase, its strongest since late 2023. The South followed with a 1% gain, while the Northeast and Midwest rose by 2.1% and 0.3%, respectively. On a year-over-year basis, the Midwest and South posted growth, while the Northeast and West saw declines.
Lawrence Yun, NAR chief economist, said a relatively strong job market is helping push against elevated rate headwinds.
“Consistent job gains and rising wages are modestly helping the housing market,” Yun said. “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.”