Pending Sales Highest Since 2006

Southern California home sales held at a seven-year high last month thanks to a stronger economy, pent-up demand, low mortgage rates and the widening perception that a home is a good investment. Prices continued to regain lost territory as buyers competed for a thin supply of homes for sale and poured a record amount of cash into the housing market, a real estate information service reported.

Pending home sales rose in May to the highest level since late 2006, a potential sign that some fence-sitters jumped in to get ahead of higher rates. Signed contracts to buy previously owned homes rose to the highest level in six years. Rising interest rates may be causing some buyers who were on the fence to get in quickly before they are priced out. It appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher.

The average rate on the 30-year fixed conforming mortgage is up about 100 basis points from 3.5 percent at the beginning of May to around 4.5 percent now.

Longer term, higher rates and more homes for sale could slow gains in home prices, whose rapid rise has spurred fears of another housing bubble.

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Thanks! Curt