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After two months of sharp decline, pending home sales surged the most on record in May, as homebuyers rushed back to the market after the phased reopening of the economy.

The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI edged up 44.3% from 69.0 in April to 99.6 in May, the strongest monthly increase on record. On a year-over-year basis, sales were still 5.1% lower than a year ago.

All four regions saw an increase in month-over-month contract activity, ranging from 37.2% in the Midwest to 56.2% in the West. However, compared to last year, only the South experienced a year-over-year increase in pending transactions, while the three other regions reported declines.

The strong recovery suggests that housing market started to turn the corner after being hammered by the coronavirus pandemic. Mortgage applications recently increased to an 11-year high, and single-family permits grew more than 10% in May, indicating that housing will lead the economic recovery. But more construction is still needed to meet this rising demand.