The NAR's pending home sales index continues to reflect homebuyers' sensitivity to even minor dips in mortgage rates. Even a few basis points can determine whether a mortgage is considered affordable or not. Contracts signed in May reflect mortgages qualified for mostly in April. The Freddie Mac weekly average rate for a 30-year fixed rate mortgage was as low as 6.62 percent in the April 10 week. It rose substantially to 6.83 percent and 6.81 percent in the subsequent two weeks, then moderated a bit to 6.76 percent the two weeks after that. Rates have moved up again in May and could discourage some homebuyers in June.

The NAR's pending home sales index for May is up 1.8 percent to 72.6 after an unrevised 71.3 in April and is up 1.1 percent year-over-year. The Econoday survey of forecasters has a consensus for May for an increase of 0.5 percent. The May index remains consistent with soft conditions in the housing market despite improved inventories of homes for sale and rising household incomes.

The indexes for pending home sales are higher month-over-month in all four regions, although up in only one compared to a year ago. The indexes for May over April index for the Northeast is up 2.1 percent, the Midwest up 0.3 percent, the South up 1.0 percent, and the West up 6.0 percent. Compared to a year ago, the indexes are down 0.5 percent in the Northeast, 16.9 percent in the Midwest, and 1.2 percent in in the West. The index for the South is up 2.0 percent compared to May 2024.

After dropping 6.3 percent in April, pending home sales are expected pretty to stabilize with a gain of 0.5 percent in May.

The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the pending home sales index which measures home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

The National Association of Realtors moved up its publication schedule in 2011. Prior to 2011, the reference month was two months trailing the release date. In 2011, the reference month trails only by one month to the release month.