Pending home sales surged in May, spurred by lower interest rates and increased inventory, the National Association of Realtors (NAR) reported Monday.
The group's Pending Home Sales Index (PHSI), which measures contract signings as an indicator of future sales figures, jumped 6.1 percent month-over-month to 103.9. It was the largest one-month increase since April 2010, when the index spiked 9.6 percent as first-time buyers moved to sign purchase contracts to qualify for the First-Time Homebuyer Tax Credit.
With both new and existing-home sales showing promise in May, the association expects the momentum to continue.
"Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation," said NAR chief economist Lawrence Yun. "However, second-half sales growth won't be enough to compensate for the sluggish first quarter and will likely fall below last year's total."
All four regions of the country posted increases in pending sales numbers, with the Northeast leading with an 8.8 percent month-over-month gain to an index of 86.3. The Northeast was also the only region where pending sales increased year-over-year, rising 0.2 percent.
In the Midwest, NAR reports pending home sales were up 6.3 percent to an index of 105.4, while pending sales in the West rose 7.6 percent to 95.4. Pending home sales in the South, meanwhile, increased 4.4 percent to 117.0.
Still, Yun says waning affordability and tight credit access are still major obstacles for first-time homebuyers, who only accounted for 27 percent of May's existing-home sales. With pending home sales still down 5.2 percent compared to a year ago, the market is feeling that group's absence.
As most first-time buyers—Millennials especially—battle challenges with debt, "[s]olid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable," Yun said.
Overall, NAR anticipates existing-home sales will finish 2014 totaling 4.95 million, down 2.8 percent from 2013.
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