The number of Americans who signed contracts to buy homes shot up in May. But the pace of buying this year remains slower than in 2013, in part because of sluggish sales during winter.
The National Association of Realtors said Monday that its seasonally adjusted pending home sales index rose 6.1% to 103.9 last month. It was the sharpest month-over-month gain since April 2010. The index remains 5.2% below its level a year ago.
Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
Lower mortgage rates and increased supplies of homes on the market drove much of last month's gains. Signed contracts rose in all four U.S. regions: the Northeast, Midwest, South and West.
The housing market is finally showing signs of momentum, though overall buying remains slower than last year.
"The sector continues to put the horrid (winter) weather behind it and is moving on," said Jennifer Lee, senior economist at BMO Capital Markets. "It certainly helps that confidence is higher, borrowing costs are slipped from the start of the year and it is reportedly becoming less strenuous to obtain a mortgage."
In a separate report last week, the Realtors said completed sales of existing homes rose 4.9% in May to a seasonally adjusted annual rate of 4.89 million homes. Still, sales are down 5% year-over-year.
The Realtors forecast that sales of existing homes will decline 2.8% this year to 4.95 million, compared with 5.1 million in 2013.
Sales of new homes jumped 18.6% last month to an annual rate of 504,000, the highest level since May 2008, the government said last week.
Two sources of friction in the housing market have recently eased: mortgage rates and supplies of homes for sale.
Sales began to slow in the second half of last year as mortgage rates crept up from historic lows and prices rose further, making it less affordable for many Americans to buy. There were also too few homes for sale, which meant that would-be buyers had to delay their purchases until they had more options from which to choose.
Average rates for 30-year fixed-rate mortgages declined to 4.17% last week, down from 4.20% the previous week. Mortgage rates are about a quarter of a percentage point higher than at the same time last year.
The supply of homes for sale has also risen. The number rose 2.2% in May to 2.28 million. The supply is 6% higher than a year ago, which analysts say should help slow price growth and boost sales.