With mortgage rates hovering at all-time lows, a growing number of prospective borrowers continue to capitalize on their option to purchase property.
Pending home sales increased significantly in May, according to property data from the National Association of Realtors. A recent report, which measures anticipated future sales, increased 5.9 percent from the previous month to a mark of 101.1. This was well above levels seen during the same period last year, when the index was at 89.2. A score of 100 indicates that conditions are equal to where they were when the index first started in 2001.
"The housing market is clearly superior this year compared with the past four years," said NAR chief economist Lawrence Yun. "The latest increase in home contract signings marks 13 consecutive months of year-over-year gains."
Meanwhile, actual closings were also much higher in May compared to the beginning of the year, and are currently on pace to see a 9 to 10 percent gain by the end of 2012, Yun added.
As buyer interest gains momentum well into the peak season for activity, this could result in a 3 percent increase in median existing-home price this year. If this trend continues, they could experience a 5.7 percent appreciation during the course of 2013, the report said.
Regionally, pending home sales in the Northeast rose 4.8 percent in May from the previous month to an index of 82.9. In addition, activity in the Midwest surged 6.3 percent during the same period to 98.9. The West also experienced a notable gain in future sales expectations, spiking 14.8 percent to 106.9, while the South only reported a slight gain of 1.1 percent. However, despite only a slight change in this region, the South had the highest index score of 108.7.
This upswing in activity is believed to be a result of not only affordable home prices, but also mortgage rates that have remained below 4 percent for all but one week so far this year.
Most recently, the rate for a 30-year fixed-rate mortgage remained unchanged during the week ending June 28 at 3.66 percent, according to Freddie Mac. This was equal to its all-time low. Meanwhile, the average rate for a 15-year FRM fell slightly to 2.94 percent from 2.95 percent the previous week.
"Mortgage rates were virtually unchanged this week hovering at or near record lows and should further help to support a recovering housing market," said Freddie Mac vice president and chief economist Frank Nothaft.