The recent rise in mortgage rates may be spurring home sales, motivating buyers to act quickly while rates are still low.

Pending home sales, a measure based on signed sales contracts, jumped a seasonally adjusted 6.7 percent in May, according to the National Association of Realtors (NAR), hitting its highest level since April 2006. On an annual basis, pending sales were 12.1 percent above their May 2012 level, marking 25 consecutive months of year-over-year gains.

The rise in signed sales agreements has occurred despite a tight supply of home listed for sale, which has been pushing up home prices.

"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," said Lawrence Yun, NAR chief economist. "This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."

10 percent annual price gain expected

The NAR has boosted its forecast for home prices and now expects prices across the nation to increase more than 10 percent in 2013, to a median of about $195,000. That would be the biggest annual increase since the years of the housing bubble, when prices rose 12.4 percent in 2005.

The NAR is projecting existing home sales to reach 5.07 million this year, an increase of about 9 percent and the highest level in seven years.

The biggest increase in pending home sales over the past year has been in the Midwest, where signed purchase contracts are up 22.2 percent compared to 12 months ago. The weakest increase has been in the West, where pending sales are up only 1.1 percent compared to one year ago, despite showing strong gains in May. In other regions, the Midwest saw an annual increase of 14.3 percent in May, while the South showed an annual gain of 12.3 percent.

Published on July 1, 2013