Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of Realtors® (NAR). All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline.
“The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market,” says Lawrence Yun, NAR chief economist.
On the topic of mortgage rates, which have remained below 4 percent in 16 of the past 17 months, Yun says it remains to be seen how long they will stay this low. Along with rent growth, rising gas prices — and the fading effects of last year’s cheap oil on consumer prices — could edge up inflation and push rates higher. For now, he foresees mortgage rates continuing to hover around 4 percent in coming months, but inflation could potentially surprise the market and cause rates to increase suddenly.
Why is this important?
Low mortgage rates mean lower mortgage payments and more affordable homes, which encourages home buying. Higher rates have the opposite effect and can discourage home buying or require that buyers shop for smaller, less expensive homes.
Learn more about mortgage rates: Will Rising Interest Rates Threaten Your Home Value?
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.