Housing activity bounced back in May, a sign that the hot market may not be cooling off any time soon.

The National Association of Realtors’ (NAR) Pending Home Sales Index, which tracks the number of homes that are under contract to be sold, rose 8% in May from the previous month. Contract signings rose in all regions of the U.S. from the prior month and the index hit its highest level for the month of May since 2005. In April pending home sales fell 4.4% from a month earlier.

The shocking results far outpaced the expected 1% decline, according to Bloomberg analysts’ consensus estimates. Pending home sales is a leading indicator of the health of the housing market.

“May’s strong increase in transactions — following April’s decline, as well as a sudden erosion in home affordability — was indeed a surprise,” said Lawrence Yun, NAR’s chief economist, in a press statement. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”

Most experts anticipated a dip in pending sales since mortgage applications had been down and sales lag mortgage activity. According to Pantheon Macroeconomics, there was a 26% plunge in applications between December 2020 and April 2021.

Meanwhile, home prices skyrocketed in April to a new record, at a pace not seen in more than 30 years, according to the latest S&P CoreLogic Case-Shiller national home price index released Tuesday. Historically low inventory is driving up home prices. Total housing inventory at the end of May amounted to 1.23 million units, up 7.0% from April’s inventory and down 20.6% from one year ago, according to the NAR.

Despite record-high home prices and a depressed number of homes for sale, homebuyers “are still lining up at a feverish pace,” said Yun. “The record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases.”

"The increase in May pending home sales underscore the current real estate market, which is being propelled by strong buyer demand, favorable demographics and low interest rates,” said Realtor.com Senior Economist George Ratiu in a press statement prior to the results.

Amanda Fung is an editor at Yahoo Finance.

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