Home sales perked up after suffering in recent months from unusually harsh winter weather, higher prices, and higher home loan rates—on less available inventory.
"A sizeable increase in purchase applications likely reflected the impact of lower mortgage rates, as well as continued growth in the job market, as confirmed by the early May employment report from the Bureau of Labor Statistics," according to the Mortgage Banker Association's Chief Economist.
Gains were broad across the nation with sales rising in the south, west and northeast, while they fell slightly in the midwest. This was the biggest rise in almost three years for sales of previously owned homes.
Pending Sales and New Construction on the Rise
Stronger pending home sales hint at a resurgence in housing market momentum during the typically busier spring buying season, when many families prefer to make a move to a new school district by the end of the summer. Pending home sales are generally a better gauge of market conditions than other indicators because they portend future closings.
The news is welcome following March's sales of new homes, which the Commerce Department said account for a much smaller portion of the overall market and tumbled 14.5 percent to their lowest level since last July.
Economists expect some pent-up demand for housing will emerge now that the weather has improved. While inventory has been a concern, builders are ramping up home construction which should ease supply bottlenecks in the market and help lower prices. Builders started construction on more new homes for the second straight month in March, the Commerce Department reported in early May.