According to the National Association of Realtors, expected home sales in May rose 44.3% compared with April.
This is the largest monthly jump in the history of the study, which began in 2001. It exceeded growth expectations by 15%. However, sales were still 5.1% lower than in May 2019.
Pending sales, signed contracts for existing homes show that buyers made purchases in May. Sales fell 22% for the month in April as the economy closed to slow the spread of coronavirus.
“It was an impressive recovery for signing contracts, and it demonstrates the sustainability of American consumers and their eternal pursuit of home ownership,” said Lawrence Youn, NAR’s chief economist. “This rebound also talks about how the housing sector can pave the way for a broader economic recovery.”
Yong noted that the market still needs a bigger offer. “However, more housing is needed to counter the constant underproduction of homes over the past decade.”
According to NAR, the offer of existing homes for sale at the end of May was almost 19% lower per year. The construction of single-family homes in May was not as strong as expected, although building permits, a measure of future construction, really gained momentum.
The supply of houses is still extremely low, but in some markets it is improving. Active listings rose more than 10% per month in San Francisco, California, Denver and Colorado Springs, as well as in Honolulu.
Buyers returned to the market, despite the restrictions of open houses in many states. Real estate agents offer both virtual tours and individual tours of empty houses, where buyers can open a safe and explore the houses on their own. Some buyers sign contracts for homes that they did not even physically enter.
Low mortgage rates also help buyers in a market that remains expensive due to high demand. The average rate on a 30-year fixed mortgage began in May at about 3.20%, according to Mortgage News Daily. By early June, it fell below 3%.
Sales of newly built homes, which are also measured by signed contracts, rose nearly 17% in May compared with April and were 13% higher than in May 2019, according to the U.S. Census. Builders have seen high demand from buyers wanting to leave densely populated urban areas. They also benefit from the lack of existing homes for sale.
Although recovery was quick in May, the future is uncertain, especially given the recent outbursts in the case of Covid-19.
“The emergence of viral hotspots in the south and west could thwart the trend for improvement,” said Daniel Hale, chief economist at realtor.com. “At the moment, demand remains steady, but we are seeing a new listing trend, as it is a good indicator of what is ahead for the sale of homes.”
At the regional level, expected home sales in the northeast rose 44.4% over the month, but fell 33.2% from a year earlier. In the Midwest, sales rose 37.2% per month and fell 1.4% per year.
Expected home sales in the south grew by 43.3% compared with the previous month and increased by 1.9% since May 2019. In the West, sales rose 56.2% per month and 2.5% lower year on year.