Pending home sales continued to climb in June, rising 16.6% monthly since May, and increasing 6.3% since June 2019, according to the National Association of Realtors. This beats the expectation for the monthly gain, which was a rise of 12.5%. It's the second straight month of increases in contract activity.
The Realtors have also raised their forecast for the housing market because of what they say is an apparent market turnaround. For 2020, existing home sales are expected to decline by only 3%. New home sales are projected to rise by 3%.
The previous forecast for existing home sales in 2020 was down 7.7%, with new home sales up 1%.
"It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago," said Lawrence Yun, NAR's chief economist. "Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve's maximum liquidity monetary policy."
Pending sales measure signed contracts on existing homes, so it shows that buyers were out shopping during the month of June, just before the most recent surge in coronavirus cases. Sales had spiked in May, a stunning 44% compared with April.
The average rate on the 30-year fixed mortgage at the beginning of June was about 3.24%, and by the end of the month it dipped to around 2.95%, according to Mortgage News Daily. Rates have been hovering near record lows, around 2.9% since then. The Realtors anticipate rates to stay at or near 3% over the next 18 months.
This follows last week's NAR report showing the sale of existing homes in June rose a stunning 20.7% monthly. That's the largest monthly gain since the Realtors began tracking the data in 1968. This count is based on closings, and sales were still lower annually, by 11.3%.
One of the biggest issues remains the supply of existing homes for sale, which fell 18% annually in June to just 1.57 million homes, according to NAR. Based on the current sales pace, that represents a four-month supply. Last June 350,000 more homes were on the market. The supply was up just 1% monthly, from May to June. Yun said the price of lumber is hurting the builders.
"While the outlook is promising, sharply rising lumber prices are concerning," Yun said. "A reduction in tariffs – even if temporary – would help increase homebuilding and thereby spur faster economic growth."
Regionally, pending home sales rose in all four regions of the United States. In the Northeast sales increased 54.4% monthly and were down only 0.9% from a year ago. In the Midwest, pending sales rose 12.2% monthly and 5.1% annually. In the South the monthly increase was 11.9% and up 10.3% annually. In the West, pending sales jumped 11.7% monthly and were up 4.7% annually.
"The Northeast's strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country," Yun said. "These remarkable rebounds speak to exceptionally high buyer demand."