Pending Home Sales Post Second Consecutive Month of Year-Over-Year Growth
The U.S. housing market is flashing signs of resilience heading into the summer of 2025. Pending home sales rose 4.8% year-over-year in May, according to fresh data released by the National Association of Realtors (NAR), marking the second straight month of annual growth for the first time since late 2024. The result builds on the 3.2% annual gain recorded in April and points to a housing market that is finding its footing despite a challenging affordability environment.
For prospective buyers, real estate professionals, and mortgage lenders alike, the consecutive months of growth offer a welcome signal that consumer demand has not been entirely extinguished by elevated borrowing costs. But the story behind the numbers is nuanced, shaped by regional momentum, shifting rate expectations, and a broader macroeconomic backdrop that remains unsettled.
What Are Pending Home Sales and Why Do They Matter?
Pending home sales measure the number of homes under contract but not yet closed. Because they capture buyer activity at the moment of commitment — before the transaction is finalized — they are widely regarded as a leading indicator of future closed sales. When pending sales rise, closed sales typically follow within one to two months, giving economists and industry observers an early read on where the housing market is heading.
The NAR's Pending Home Sales Index is one of the most closely watched metrics in U.S. real estate. A reading above the benchmark signals expansion, while a sustained decline often foreshadows a cooling market. Two consecutive months of year-over-year growth, therefore, carries meaningful weight for anyone trying to gauge the direction of residential real estate in 2025.
A Late Spring Buyer Rush Despite Stubborn Mortgage Rates
One of the most striking aspects of May's pending sales report is that the gains came despite mortgage rates that have refused to budge meaningfully lower. According to Mortgage Bankers Association data, rates on typical 30-year fixed home loans hovered above 6.5% through most of May. That is well above the roughly 6% level that marked the beginning of 2025 and still significantly elevated compared to the near-historic lows many buyers experienced earlier in the decade.
NAR Chief Economist Dr. Lawrence Yun offered a direct interpretation of the trend. "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," he said in a statement accompanying the report.
Yun's framing is significant. It suggests that a psychological shift may be underway among American homebuyers — one in which waiting indefinitely for rates to fall back toward 3% or 4% is no longer seen as a viable strategy. Instead, buyers appear to be adjusting their expectations and moving forward with purchases, recalibrating their budgets around the current rate environment.
Affordability Context: How May 2025 Compares to a Year Ago
While affordability remains a genuine challenge for many households, the year-over-year comparison actually favors buyers in May 2025. One year earlier, in May 2024, mortgage rates were trading around or above 6.9% — a level that followed a sharp spike in volatility triggered by President Donald Trump's "Liberation Day" tariff announcements. That backdrop made last spring one of the more difficult affordability environments in recent memory.
By contrast, even though rates climbed from the 6% range at the start of 2025, they remain below last May's elevated levels. That relative improvement, modest as it may be in absolute terms, appears to have given enough buyers the confidence to move forward. Across most major U.S. markets, affordability has improved this spring compared to the same period a year ago, particularly for those financing purchases with mortgage loans.
It is worth noting, however, that the broader macroeconomic environment has introduced new pressures. The ongoing conflict in the Middle East, which escalated significantly after the U.S. entered the war with Iran in late February, has contributed to inflationary pressures that have rippled through the economy. Mortgage rates began climbing from around 6% early in the year in part as a response to these inflationary dynamics.
Regional Breakdown: Broad-Based Gains With Notable Hotspots
One of the more encouraging dimensions of May's pending home sales report is that the gains were not concentrated in a single region. NAR reported monthly and yearly increases across all four major U.S. regions it tracks, a broad-based pattern that lends additional credibility to the idea that demand is genuinely recovering rather than being propped up by one isolated market.
Among the 50 largest U.S. metro areas, the sharpest annual spikes were concentrated in Kansas City, San Antonio, and Minneapolis. These markets, while geographically diverse, share characteristics that tend to attract buyers when coastal markets become prohibitively expensive: relatively lower price points, strong job markets, and available inventory that gives buyers meaningful choice. Their outperformance may reflect an ongoing migration of demand away from the most expensive metros toward cities where purchasing power stretches further.
Monthly Momentum Accelerates
The pace of month-over-month improvement also picked up in May. After a 1.4% monthly rise in April, pending home sales surged 3.8% on a monthly basis in May — a notable acceleration that reinforces the narrative of a strengthening late-spring market. Monthly gains of nearly 4% are not routine in the current environment, and the jump suggests that buyer activity intensified as the season progressed rather than fading as is sometimes the case when affordability headwinds are severe.
What This Means for the Housing Market Outlook
Two consecutive months of year-over-year growth in pending home sales does not by itself confirm a sustained housing recovery, but it does represent a meaningful turning point after an extended period of weakness. The combination of pent-up demand, a psychological recalibration around higher rates, and year-over-year affordability improvements has created conditions in which more buyers are willing to act.
For sellers, the data suggests that well-priced homes in desirable markets are attracting attention. For lenders and mortgage professionals, the acceleration in contract signings points to a pipeline of activity that could support origination volumes through the summer months. And for economists watching the broader economy, the resilience of housing demand — even in a high-rate, geopolitically uncertain environment — is a data point that speaks to the underlying strength of consumer appetite for homeownership.
Whether the momentum can be sustained will depend heavily on where mortgage rates head from here, how inflationary pressures evolve in response to the ongoing geopolitical situation, and whether inventory levels rise enough to give buyers sufficient options. For now, however, the housing market appears to be in better shape than many observers feared heading into the 2025 spring buying season.