Housing News

Pending Home Sales Fell in May: Lower Mortgage Rates Could Lure Buyers Back to the Market

Fewer homes went under contract in May—but sales could pick up as mortgage rates continue to dip.

The number of pending home sales fell 2.1% from April to May, according to a recent report from the National Association of Realtors (NAR.) Homes under contract that have not yet closed were down 6.6% year-over-year in May.

The decline in pending sales comes even as more homes have been going up for sale. The problem is fewer buyers can afford the combination of elevated mortgage rates and elevated home prices. Others are holding off on pulling the trigger until mortgage rates fall.

"The market is at an interesting point with rising inventory and lower demand," NAR Chief Economist Lawrence Yun said in a statement. "Supply and demand movements suggest easing home price appreciation in upcoming months."

Lower mortgage rates could give home sales a boost

Mortgage rates were above 7% for most of May, according to Freddie Mac data. Rates have since tumbled a bit. That has improved affordability a little.

"These [pending sales] declines occurred when mortgage rates were rising in April and May," First American Deputy Chief Economist Odeta Kushi said in a statement. "If mortgage rates continue their descent alongside rising inventory levels, some buyers may be enticed off the sidelines and boost the summer homebuying season."

Rates ticked down to an average 6.86% for 30-year fixed-rate loans in the week ending June 27, according to Freddie Mac. That is the lowest level in nearly three months.

"By historical standards, the economy is in good shape, and we expect rates to continue to come down over the summer months, bringing additional homebuyers back into the market," Freddie Mac Chief Economist Sam Khater said in a statement.

Where are pending sales down the most?

Nationally, pending home sales fell the most annually in the South. About 10.4% fewer buyers went under contract in May compared to a year earlier, according to the NAR report.

The region was followed by the Midwest, where pending sales were down 5.6% year-over-year in May. Pending sales were down 2.3% in the Northeast and 2.1% in the West.

"In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices," NAR's Yun predicted.