A sharp jump in interest rates may have deterred some home buyers in May. Signed contracts to buy existing homes, so-called pending home sales, rose just 0.9 percent in May from April, according to the National Association of Realtors, after a downward revision to April's reading. That is slightly lower than analysts predicted, but is still the highest level on the association's index since April of 2006. Pending sales are now 10.4 percent higher than one year ago.
"The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring," said Lawrence Yun, chief economist for the Realtors. "It's very encouraging to now see a broad based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive."
Pending home sales rose 6.3 percent in the Northeast, and are 10.6 percent above a year ago. In the Midwest, sales declined 0.6 percent for the month, but are 7.8 percent above May 2014. In the South they fell 0.8 percent and are 10.6 percent above last May, and in the West sales rose 2.2 percent and are 13.0 percent above a year ago.
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This as the average contract interest rate for 30-year fixed loans with conforming balances went from around 3.6 percent to over 4 percent from mid-April to June. While that might not seem like a huge jump, coupled with higher home prices, it does hurt affordability.
"Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages," added Yun. "Without meaningful gains in new and existing supply, there's no question the goalpost will move further away for many renters wanting to become homeowners."
Closed sales of existing homes rose a larger-than-expected 5.1 percent in May month-to-month, as Realtors reported more first-time home buyers returning to the market. Rent growth continues to push higher as apartment occupancy now stands at the highest level on record.