Pending home sales increased 0.7% on a month-over-month basis to 99.9 in May, ending a six-month streak of declines, according to the National Association of Realtors (NAR). On a year-over-year basis, pending home transactions decreased 13.6%.

“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” says NAR chief economist Lawrence Yun. “Contract signings are down sizably from a year ago because of much higher mortgage rates.”

According to the NAR, at the median single-family home price and with a 10% down payment, the monthly mortgage payment has increased by approximately $800 since the beginning of the year as mortgage rates have increased 2.5 percentage points since the start of the 2022.

“Trying to balance the housing market by choking off demand via higher mortgage rates is damaging to consumers and the economy,” Yun says. “The better way to balance the market is through increased supply, which also helps the broader economy.”

Yun says variations in home prices and affordability contributed to regional differences in pending sales activity in May, with the largest decline in contract activity occurring in the West, where homes are the most expensive. The Pending Home Sales Index (PHSI) decreased 5% in the West in May and was down 19.8% on a year-over-year basis.

In the Northeast, pending sales increased 15.4% compared with April but decreased 11.9% compared with May 2021. The Midwest PHSI decreased 1.7% in May and 8.8% on a year-over-year basis.

The South PHSI increased 0.2% in May but decreased 13.8% compared with a year ago.

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