Pending Home Sales Post Second Straight Month of Annual Gains in May 2025
The U.S. housing market is showing renewed signs of life heading into summer. Pending home sales posted a second consecutive month of year-over-year growth in May 2025, a milestone not reached since late 2024. The National Association of Realtors (NAR) reported that contract signings in May were 4.8% higher than the same month a year ago, building on the 3.2% annual increase recorded in April. The data signals that despite persistent affordability challenges and elevated mortgage rates, American homebuyers are returning to the market with conviction.
What the May Pending Home Sales Data Tells Us
Pending home sales are widely regarded as a leading indicator of future home purchases, since they reflect signed contracts rather than closed transactions. When pending sales rise, it typically means more closings are on the horizon — making this report a closely watched barometer of near-term housing market health.
May's results were not only strong on an annual basis but also demonstrated solid month-over-month momentum. After a relatively modest 1.4% monthly increase in April, pending sales surged 3.8% from April to May, suggesting that buyer activity accelerated as the spring homebuying season hit its peak. Critically, gains were broad-based. NAR reported monthly and annual increases across all four major U.S. regions it tracks — the Northeast, Midwest, South, and West — indicating that the recovery is not confined to a single geography but is instead a nationwide trend.
A Late Spring Buyer Rush Despite Stubborn Mortgage Rates
Perhaps the most striking aspect of May's pending home sales data is the context in which it occurred. Mortgage rates on typical 30-year home loans remained above 6.5% through most of May, according to Mortgage Bankers Association data. That's a significant carrying cost for prospective buyers, and rates show little sign of dropping sharply in the near term.
Yet buyers pressed forward anyway. NAR Chief Economist Dr. Lawrence Yun described the activity as "a late spring buyer rush," and offered a telling explanation: consumers appear to be accepting above-6% mortgage rates as the new normal rather than waiting on the sidelines for a rate environment that may not materialize anytime soon.
"A late spring buyer rush — even with mortgage rates not budging — is an indication of pent-up housing demand and consumers' acceptance of above-6% mortgage rates as the new normal," Yun said in a statement.
This psychological shift among buyers could be one of the more consequential developments in the 2025 housing market. After years of rate shock and market paralysis, a growing segment of the buying public appears to be recalibrating expectations and moving forward with purchases regardless of where rates stand.
How Affordability Compares to Last Year
While today's mortgage rates remain elevated by historical standards, affordability has actually improved for many buyers when compared to May 2024. Mortgage rates spent much of last May at or above 6.9%, driven in part by the market volatility that followed President Donald Trump's high-profile "Liberation Day" tariff announcements. By contrast, rates entered 2025 around 6%, and even as they have climbed modestly since, they remain meaningfully below where they were during the same period last year.
That year-over-year improvement in borrowing costs has made a real difference for buyers seeking mortgage financing, lowering monthly payments and expanding what buyers can afford within a given budget. For many households that were priced out of the market last spring, the slightly more favorable rate environment of 2025 may have been just enough to tip the scales toward a purchase.
It is worth noting, however, that affordability challenges have not disappeared. Inflationary pressures tied to the ongoing conflict in the Middle East — which began in late February — have added economic uncertainty and kept upward pressure on rates throughout the spring. The full impact of those forces on housing affordability will continue to unfold in the months ahead.
Regional Highlights: Kansas City, San Antonio, and Minneapolis Lead the Way
While gains were recorded across all four major U.S. regions, some individual metro areas stood out with particularly strong annual spikes. Among the 50 largest U.S. metro markets, Kansas City, San Antonio, and Minneapolis recorded the largest year-over-year increases in pending home sales in May. These cities — spanning the Midwest and South — represent diverse housing markets with varying price points and economic drivers, which further underscores the broad-based nature of the current demand recovery.
Smaller and mid-sized markets like these have increasingly attracted buyers who find coastal cities prohibitively expensive. Relative affordability, job growth, and quality of life factors continue to make metros like Kansas City and San Antonio appealing destinations, and the pending sales data suggests that appeal is translating into concrete buying activity.
What This Means for the Housing Market Going Forward
Two consecutive months of year-over-year pending home sales growth is an encouraging sign for the broader housing market, particularly after an extended period of subdued activity. The combination of pent-up demand, improved affordability relative to last year, and apparent buyer acceptance of the current rate environment creates a more constructive backdrop for home sales heading into the second half of 2025.
- Pent-up demand built over years of rate-driven market hesitation is now beginning to convert into signed contracts.
- Year-over-year mortgage rate comparisons are favorable, giving buyers more purchasing power than they had in spring 2024.
- Regional diversity in the gains suggests a structurally healthier market rather than a spike driven by a single hot area.
- Buyer psychology may be shifting in a durable way, with above-6% rates increasingly viewed as a market reality rather than a reason to wait.
Of course, risks remain. Inflationary pressures, geopolitical uncertainty, and the possibility of renewed rate volatility could temper momentum in the months ahead. Inventory levels in many markets continue to constrain buyer options and support elevated home prices. And affordability, while better than a year ago, remains stretched for many first-time buyers.
Still, the May pending home sales report offers one of the clearest signals yet that the housing market is finding its footing in 2025. If this trajectory holds through the summer months, it could mark a meaningful turning point after one of the most challenging stretches in recent real estate history. Buyers, sellers, and industry professionals alike will be watching June's data closely to see whether the momentum can be sustained.