Pending home sales rise; Economy posts sharper contraction in first quarter; Durable goods orders surge

May’s single-family homes under contract to be sold, with deals not yet closed, increased 1.8% from the prior month while rising 1.1% from a year earlier, according to the National Association of Realtors. Pending sales provided a slightly upbeat indicator for future transactions when U.S. housing sales and development remain sluggish by historical standards.

“Consistent job gains and rising wages are modestly helping the housing market,” NAR Chief Economist Lawrence Yun said in a statement Thursday. “Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains.”

The trade group, which indexes deal-signing volume but does not report specific contract numbers, noted pending sales increased from a year earlier in the Midwest and South, while declining in the Northeast and West. Yun said the Northeast’s housing shortage is boosting home prices, with more than a quarter of homes selling above list price in that region.

“Conversely, more inventory in the South gives homebuyers greater negotiation power,” Yun said. “Price declines in the South should be considered temporary given the region’s strong job creation.”

NAR and government data released this week showed May’s completed sales of new single-family homes fell 13.7% from the prior month and dropped 6.3% from a year earlier. Sales of existing homes rose 0.8% from the previous month but declined 0.7% from a year earlier.

The U.S. economy contracted at an annual rate of 0.5% in the first quarter, according to the Commerce Department’s second and final revision of its quarterly tracking of gross domestic product.

The latest number reflected a sharper drop in GDP than the prior preliminary figure showing a 0.2% decline, and also marked the first official year-over-year contraction since the first quarter of 2022.

Oxford Economics Chief U.S. Economist Ryan Sweet said the revised GDP decline was caused largely by a drop in consumer and business spending, with consumers especially cutting back on recreation and transportation services. Both categories are sensitive to declines in consumer sentiment about the overall economy, spurred by concerns over trade tariffs, and travel spending has continued to decline in the second quarter.

“The revisions to GDP won’t have significant implications for the Federal Reserve, as it’s backward-looking,” Sweet said in a statement Thursday, referring to future Fed policy on interest rates. “The Fed is focused on the inflation risks stemming from tariffs and the labor market.” 

New U.S. orders for manufactured durable goods, which often affect demand for retail and industrial real estate, soared 16.4% from the prior month to reach $343.6 billion in May, the Commerce Department reported Thursday.

Despite consumer and business jitters about the economy, those orders for goods meant to last three or more years — such as vehicles, home appliances, computers and other business equipment — have now increased in five of the last six months after a 6.6% drop in April.

Durable goods orders “blasted past expectations” in May but were juiced primarily by a surge in transportation orders, “reflecting a banner month for Boeing,” Bernard Yaros, lead U.S. economist for Oxford Economics, said in a Thursday statement. He said business equipment spending is still dragging on durable goods orders, with that category expected to decline nearly 1% on an annualized basis for the current second quarter.

“Fiscal policy will begin to support equipment spending by year’s end, due to a collection of investment incentives in the Republican fiscal package making its way through Congress,” Yaros said.