Pending home sales jump 3.8% in May, beating forecasts by wide margin

U.S. pending home sales surged 3.8% in May to an index reading of 76.8, more than triple the 1% increase economists had forecast, signaling unexpected resilience in the housing market as buyers absorbed the impact of higher mortgage rates.

"The month's sales performance suggested that demand remained relatively steady despite headwinds from earlier increases in mortgage rates," said Brad Case, chief residential economist at Homes.com, a CoStar Group platform. "Sales exceeded expectations."

The National Association of Realtors' pending-home sales index, which tracks contract signings as a leading indicator of closed sales, posted its strongest monthly gain since late 2024. The median existing-home price rose 1.8% from a year earlier to $395,000, according to a separate report from Homes.com, as inventory expanded and the market moved toward a more balanced position between buyers and sellers.

The data suggests the housing market is proving more durable than many economists anticipated after mortgage rates climbed earlier this spring. The last time pending sales posted a comparable upside surprise was in October 2024, when the index rose 2% against a 0.8% consensus, preceding a period of steady price gains through year-end. If the pattern holds, the May reading could support homebuilder sentiment and related sectors while giving the Federal Reserve less urgency to cut rates, as a firm housing market signals broader economic strength.

Regional and property-level divergence

The national headline masked significant variation across markets. Among large metropolitan areas, Chicago and Baltimore posted solid home-price gains, while Miami, Orlando and Raleigh saw prices soften or hold flat. Inventory trends also diverged, with some markets adding supply faster than others.

Single-family home prices rose 1.5% year-over-year, outpacing a 1.1% increase for townhomes, while condo prices edged slightly lower. Inventory expanded across all three categories, with the largest gains in townhomes. In Brevard County, Florida, single-family closed sales fell 14% from a year earlier to 908 units, though the median price rose 2.7% to $385,000, illustrating the selective nature of demand in a normalizing market.

The combination of rising supply and steady demand points to a market gradually returning to balance after two years of acute inventory shortages. For the Fed, the data adds to a mixed picture: strong consumer spending and a resilient housing market could keep inflation pressures alive, potentially delaying rate cuts that many traders had priced for the second half of 2026.

This article is for informational purposes only and does not constitute investment advice.