Mortgage rates gave buyers a window in April. They took it, and now that window is closed.
U.S. existing-home sales jumped 2.8 percent in May to their highest level since October 2022, according to Redfin data released Monday. But a simultaneous read on pending sales tells a different story about where the market is headed.
Pending home sales, contracts signed in May rather than closings, rose just 0.1 percent month over month, a near-standstill that reflects the rate environment buyers were actually navigating last month. The 30-year fixed-rate mortgage hit an 11-month high in May before easing to 6.48 percent as of June 4, according to Freddie Mac’s weekly survey, still well above the 6.3 percent range that drove April contract signings and, ultimately, May’s strong closing numbers.
Closed sales reflect decisions buyers made in April, when rates briefly dipped. Pending sales reflect what happened when those rates climbed back up. Rates are holding steady in the mid-6 percent range, with uncertainty over the Iran conflict and rising inflation continuing to create upward pressure, according to Money Magazine.
The possibility that the Federal Reserve may hike the federal funds rate rather than cut has been raised as consumer prices climb.
Independent data supports the softer forward outlook. Mortgage applications fell 2.5 percent for the week ending May 29, according to the Mortgage Bankers Association, with purchase applications hitting their slowest weekly pace since April. MBA Vice President and Deputy Chief Economist Joel Kan noted that a slight retreat in rates that week did not lead to an increase in applications.
Those pressures showed up unevenly across markets. San Jose, California, closed sales surged 25.7 percent year over year, and San Francisco jumped 19.3 percent, with Redfin attributing both to AI sector compensation driving demand in the Bay Area. At the other end, Detroit closed sales fell 14 percent year over year, and New York City dropped 9.1 percent.
Overall home sales, including both existing and newly built homes, rose 3.8 percent month over month, also the highest since October 2022, per Redfin. The median U.S. home sale price rose 2 percent year over year to $398,771.
Total inventory reached a six-year high, with new listings climbing to their highest level since 2022, yet prices continued rising, and the share of homes selling below list price has declined for six straight months.
