June 24, 2019

Mortgage rates down, pending home sales up in May

New approved contracts for existing home sales saw an expected seasonal bump in May, and the number of active OK’d contracts moving toward closing increased proportionally.

There were 958 new contracts (pending sales) in May and 1,350 in the active file, according to Realtor Property Resource (RPR).

The Northeast Tennessee Association of Realtors' (NETAR), Pending Sales Index, shows new contracts were 8 percent higher than May last year. The active, pending sales index, which includes OK’d contracts from previous months that have not closed -  was 12 percent higher, the highest it has been in three years.

Pending sales are a leading indicator of housing activity based on signed contracts for existing single-family homes, condominium, and townhome resales. Since resales go under contract a month or two before the deal is closed, the index typically leads existing home sales by a month or two.  The index is based on a year-over-year rolling average of both new and existing resales compared to the rolling average of the current month to take some of the statistical noise out of the data. Under normal market conditions, it’s not unusual to see up to 5 percent of contracts fall through. In today’s market, that fall-through rate is often much higher due to contract contingencies.

 “The 30-year mortgage rate decline has leveled off and been under 4 percent since late May. Buyers interpreted that as a sign to lock in lower mortgage payments while they were at this year’s record lows.  And the slight slowing of existing home sales growth rate is nudging sellers to the position that now is an opportune time to sell, said NETAR President Karen Randolph.

So far this year new listings are almost 9 percent better than the first five months of last year while new pending sales are up a little more than 14 percent from last year. The region had 3.7 months of inventory in May. That’s the number of months it would take to exhaust active listing at May’s sales rate, said NETAR data analyst Don Fenley. It’s also the tightest inventory the region has seen in two years.

NETAR is the voice for real estate in Northeast Tennessee - is the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends reports, and the regional market analytics can be found on the NETAR websites at .