Pending home sales rose in May to the highest level since late 2006, implying a possible spark as mortgage interest rates began to rise, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 6.7 percent to 112.3 in May from a downwardly revised 105.2 in April, and is 12.1 percent above May 2012 when it was 100.2. Contract activity is at its strongest pace since December 2006, when it reached 112.8. Also, pending sales have been above year-ago levels for the past 25 months.

Lawrence Yun, NAR chief economist, said there may be a fence-jumping effect.  “Even with limited choices, 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,” he said.  “This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand.”

Regionally, the index went unchaged in the Northeast, but is 14.3 percent above a year ago.  In the Midwest, it jumped 10.2 percent to 115.5 in May and is 22.2 percent higher than May 2012.  Pending home sales in the South rose 2.8 percent and 16 percent in the West.

Source: NAR