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May Pending Home Sales Top Estimates Despite High Mortgage Rates

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May Pending Home Sales Top Estimates Despite High Mortgage Rates

US pending home sales increased more than expected last month despite elevated mortgage rates, the National Association of Realtors said Wednesday.

The forward-looking indicator of home sales based on contract signings increased 3.8% month over month in May, according to the report. Analysts expected a 0.9% gain, according to a survey compiled by Bloomberg.

"A late spring buyer rush -- even with mortgage rates not budging -- is an indication of pent-up housing demand and consumers' acceptance of above-6% mortgage rates as the new normal," NAR Chief Economist Lawrence Yun said.

"The inventory-constrained Northeast region, which has seen faster home price growth but slower home sales for several months, is now showing more buyer contract signings," Yun said. "More supply is needed to help moderate home price growth."

The average 30-year fixed mortgage rate was 6.52% as of June 11, up from 6.48% a week ago, Freddie Mac data showed. Mortgage applications in the US declined last week as both refinancing and purchase demand weakened, the Mortgage Bankers Association said Wednesday.

Pending home sales increased both sequentially and annually in all regions, NAR data showed.

The US and Iran have agreed to end their war and reopen the Strait of Hormuz after months of shipping traffic disruption. The two sides are scheduled to sign the peace deal in Switzerland Friday.

"Going forward, falling oil prices will help lower mortgage rates," Yun said. "But declines will be modest given sizable borrowing by the federal government and strong (artificial intelligence) investment spending by tech companies."

US housing starts plunged in May to their lowest level since 2020, driven by a sharp decline in multi-family construction, the Census Bureau and the Department of Housing and Urban Development said Tuesday. Building permits, a key indicator of future homebuilding activity, fell during the month.

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