This May, the U.S. housing market showed signs of stirring from its recent slumber. Pending home sales—the contracts signed between buyers and sellers—rose by 1.8% compared to April, and even ticked up 1.1% from the same month last year. Data from the National Association of Realtors revealed that all four major U.S. regions saw month-over-month gains, with the Midwest and South leading the way with 2.6% and 2% increases, respectively. While the Northeast and West experienced slight declines, the overall trend hints at a market inching toward balance.
If you live in the U.S., you might have noticed homes lingering longer on the market. Take Mark and Emily from Detroit, Michigan, for example. This spring, they planned to buy a new home but found many listings had been sitting unsold for months, with prices steadily dropping. “We looked at several houses and saw sellers becoming more willing to negotiate,” Mark shared. This reflects the broader trend—May saw 19.1% of listings with price cuts, the highest share for any May since Realtor.com began tracking in 2016.
Why this shift? The main culprit remains high mortgage rates, which continue to dampen buyers’ enthusiasm. After years of historically low rates, the rising costs of borrowing have many buyers hesitating. Another factor is the “lock-in effect”: many current homeowners with low-rate mortgages are reluctant to sell, fearing they’d face higher rates on a new loan, which reduces the number of homes available and tightens supply.
Still, the spring homebuying season is picking up pace as buyers try to seize opportunities presented by falling prices. Pending home sales represent the first formal step in a home sale—the moment buyer and seller agree on price and terms—and typically lead existing home sales by one to two months. Thus, May’s rise could foreshadow increased home sales in the coming months.
Jennifer and her husband in Southern California experienced this firsthand. “We’ve been house hunting since 2024 but felt priced out for a long time,” she said. “When sellers started dropping prices this May, it finally felt like buying was within reach again.”
However, uncertainty remains. Though the Federal Reserve has held interest rates steady recently, rates have generally trended upward through spring, making borrowing costs still steep. Even slight shifts in rates can influence buyers’ decisions, so the summer months will be critical in shaping market momentum.
One notable development is the growing inventory. Housing supply recently topped 1 million units for the first time since winter 2019, giving buyers more options than they’ve had in years. Patient buyers now hold more negotiating power as sellers adjust prices to attract interest.
In other words, while home prices remain high overall, the market is moving toward a healthier, more balanced state. Sellers can no longer count on constant price appreciation and must adapt their strategies, while buyers gain room to negotiate and select from a wider pool.
For everyday families, buying a home remains a significant milestone influenced not only by price and rates but also by long-term life plans. Like Mark and Emily, many buyers weigh loan affordability against the desire for a comfortable, lasting home. This evolving market landscape offers new possibilities for those willing to navigate it carefully.
As summer approaches—the traditional busy season for home sales—the housing market’s direction will depend heavily on interest rate trends, inventory levels, and seller pricing tactics. It’s likely that savvy, patient buyers will find more opportunities, while sellers must be flexible to succeed.
All in all, May’s uptick in pending home sales injects a hopeful note into 2025’s housing outlook. Despite ongoing challenges, the market is recalibrating. Buyers and sellers who stay informed and strategic will be best positioned to achieve their goals in the months ahead.