U.S. pending home sales surged in the month of May on a sequential basis, but fell year-on-year. On a month-on-month basis, sales rose 44.3 percent, whereas it dropped 5.1 percent year-on-year. The sharp rise in sales sequentially was well above expectations and indicate that the housing market is entirely on the path to recovery, noted Wells Fargo in a research report.
The sales index is based on signed contracts for single family as well as condo sales and leads existing sales by 30 to 45 days. This indicates that a similar bounce in existing sales is expected in months ahead.
Pending sales are still down 5.1 percent on a year-on-year basis, and nearly 11 percent from February’s peak. However, the stable rise in purchase mortgage applications also indicates to more rebound ahead.
The above consensus rise shows that several sales were likely delayed, as opposed to cancelled, due to the lockdowns.
Region wise, pending sales rose by double-digits in every region, and the South, Midwest and West have nearly returned to prior-peak levels.
“The formerly COVID-embattled Northeast is still about 36% below February levels, which suggests the latest outbreaks of the pandemic in the Sun Belt could hamper sales there this summer”, noted Wells Fargo.