WASHINGTON, May 19 (Reuters) – Contracts to purchase previously owned U.S. homes increased for a third straight month in April, likely as a retreat in mortgage rates pulled buyers back into the market.
The pending home sales index rose 1.4% last month to 74.8, the National Association of Realtors said on Tuesday. Economists polled by Reuters had forecast contracts, which become sales after a month or two, increasing 1.0%.
Contracts surged 6.6% in the Northeast and advanced 3.0% in the Midwest region. They climbed 0.4% in the West, but fell 0.7% in the South.
The popular 30-year fixed mortgage rate jumped to an average of 6.46% at the beginning of April, data from mortgage finance agency Freddie Mac showed, as the U.S.-Israel war with Iran boosted oil prices and U.S. Treasury yields.
The rate, which tracks Treasury yields, had dropped to 5.98% on the eve of the conflict amid expanded purchases of mortgage-backed securities by Freddie Mac and Fannie Mae. It averaged 6.30% at the end of April.
“Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates,” said Lawrence Yun, the NAR’s chief economist. “Demand will easily be even higher once mortgage rates retreat to the levels they were at earlier this year.”
The housing market has remained on the back foot this year, weighed down by higher borrowing costs, tariffs on imported goods, including lumber, as well as still-tight inventory and elevated home prices.
Residential investment, which includes home building and broker commissions, has contracted for five straight quarters.
A survey on Monday showed homebuilder sentiment remaining subdued in May, with mortgage rates and economic uncertainty because of the Middle East conflict, high land, labor and construction costs cited as constraints.
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama )
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