Why pending home sales showed growth today amid higher rates

Today, pending home sales came in beating estimates, showing almost 5% year-over-year growth. With mortgage rates rising over the past few months, some people were shocked that the data remained positive. But for those who have read the weekend Housing Market Tracker and follow our podcast — especially since last year when I discussed the housing market shifting in mid-June — nothing was surprising today. Now that we have proved we can track housing data months ahead of traditional reports, the question is: will this growth continue?

From NAR: Pending Home Sales: “Pending home sales in May increased by 3.8% month-over-month and 4.8% year-over-year, according to the National Association of REALTORS® Pending Home Sales report. The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales under contract...Month-over-month and year-over-year pending home sales rose in the Northeast, Midwest, South and West.”

I believe the reason for shock for some was that mortgage rates went from 5.99% to 6.75% recently and naturally, with all the data in the past few years, people just assumed home sales would be falling, not rising.

Two key reasons why home sales grew

1. Mortgage rates, unlike 2023, 2024, and 2025, haven’t risen above 7% this year. This is due to better mortgage spreads — and why my peak forecast for rates in 2026 was only 6.75%. This year has had the lowest mortgage rate curve to start the first half of the year since 2022. What I have said for years is that if mortgage rates get below 6.64% and head down toward 6%, housing demand data improves. For most of this year we have been below 6.64% due to mortgage spreads.

The data below was compiled at the end of day last Friday and included in the latest Housing Market Tracker.

Let’s compare last week’s mortgage rates to where they would have been over the last three years, given the 10-year yield’s current level:

• If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.70% today, not 6.58%.
• If we had the worst levels of 2024, mortgage rates would be 7.32% today 
• If we had the worst levels of 2025, mortgage rates would be 7.13% today.

2. While inventory has been negative year over year the past three weeks, inventory is at much healthier levels than in the years 2020-2023, which were savagely unhealthy. This has cooled price growth so much that wages are outpacing home prices. This is a huge key for the housing market for years to come.

Conclusion

When you’re working from an extreme low level of sales, it doesn’t take much to move the needle, with the two key variables above explaining why housing has held up better than expected. 

We created the weekend tracker at the end of 2022 to give people live, fresh data so they can look ahead months in advance of traditional monthly housing reporting. All we need is mortgage rates below 6.64% to see positive demand and that explains today’s pending home sales beat.