While closed sales in May reached the highest level in nearly four years, pending contracts tell a different story. The latest data from Redfin and Freddie Mac shows where the market is heading.
Mortgage rates gave buyers more breathing room in April. They received it and now that window is closed.
U.S. existing home sales rose 2.8% in May, the highest level since October 2022, according to Redfin data released Monday. But reading pending sales at the same time tells us something else about where the market is heading.
Pending home sales (contracts signed in May rather than closings) rose just 0.1% month over month, largely at a standstill, reflecting the interest rate environment that buyers have actually weathered over the last month. After hitting an 11-month high in May, 30-year fixed-rate mortgages have fallen to 6.48% as of June 4, according to Freddie Mac’s weekly survey, but are still well above the 6.3% range that drove closings in April and ultimately drove strong closings in May.
The closed sales reflect decisions made by buyers in April, when interest rates briefly fell. Pending sales reflect what happened when interest rates rose again. Interest rates have remained stable in the mid-6% range, as uncertainty surrounding the Iran conflict and rising inflation continue to create upward pressure, according to Money Magazine.
Rising consumer prices are making it more likely that the Federal Reserve will raise the federal funds rate rather than lower it.
Independent data supports a more moderate outlook. According to the Mortgage Bankers Association, mortgage applications fell 2.5% in the week ending May 29, with purchase applications at their slowest weekly pace since April. MBA Vice President and Deputy Chief Economist Joel Kang noted that the slight setback in interest rates during the week did not translate into an increase in applications.
These pressures manifested unevenly across the market. Closed sales in San Jose, Calif., rose 25.7% year-over-year, and in San Francisco they rose 19.3%, both of which Redfin attributed to AI sector rewards boosting demand in the Bay Area. Meanwhile, closing sales in Detroit were down 14% year over year, and New York City was down 9.1%.
Overall home sales, including existing homes and new construction, rose 3.8% month over month, also the highest level since October 2022, according to Redfin. The median home sales price in the U.S. rose 2% year over year to $398,771.
New listings have reached their highest level since 2022 and total inventory has hit a six-year high, but prices continue to rise and the percentage of homes sold below list price has declined for the sixth consecutive month.
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