• The National Association of Realtors' Pending Home Sales Index rose 3.8% in May to 76.8, signaling a rebound in contract activity.
  • Despite the monthly gain, the index remains well below the 100 benchmark associated with 2001-era activity, highlighting subdued market strength.
  • Mortgage rate volatility and inventory are key factors driving the market, with economists cautioning that the rebound may be temporary without sustained rate declines.

Pending Home Sales Index Bounces Back

The National Association of Realtors reported Thursday that its Pending Home Sales Index increased 3.8% in May to 76.8, marking a monthly improvement in contract signings. The reading, however, is still below pre-pandemic levels and the long-run average, underscoring the ongoing challenges in the housing market.

“Contract activity picked up in May as buyers took advantage of slightly lower rates and more inventory,” said NAR Chief Economist Lawrence Yun, in a statement. “Still, the market is far from robust, and persistent rate volatility continues to weigh on affordability.”

The index, which tracks signed contracts for existing-home sales, typically leads closed sales by one to two months. The May gain suggests some stabilization in demand, though economists warn that the rebound could be fleeting if mortgage rates spike again.

“Mortgage rates remain the dominant factor for buyers,” said Sam Khater, chief economist at Freddie Mac. “While we’ve seen some improvement, the path forward depends heavily on inflation and the Fed’s policy moves.”

Mortgage rates have fluctuated in recent weeks, with the 30-year fixed rate averaging around 6.9% as of late May, down from a peak of 7.2% earlier in the year but still elevated compared to pre-pandemic levels. Inventory has been gradually increasing, which has provided some relief to buyers, but affordability remains strained due to high home prices and borrowing costs.

“Rising inventory and improving affordability could support sales later this year, but that recovery is contingent on rates staying flat or declining,” Yun noted. “Right now, the market is very sensitive to any rate movements.”

The Pending Home Sales Index has fluctuated with mortgage rate expectations over the past two years. Similar rebounds in 2024 and 2025 proved temporary when rates resumed their climb. Analysts caution that this pattern may repeat unless inflation cools more decisively.

In the short term, economists expect momentum to waver month-to-month as rate volatility continues. Longer-term forecasts suggest a gradual recovery later in 2026, assuming rate stability and sustained inventory growth. Regionally, the South and Midwest saw the strongest gains in May, while the West lagged due to higher prices and stricter supply constraints.

Correction: an earlier version of this article misstated the benchmark for the index. The 100 level corresponds to contract activity in 2001. This has been corrected.