Pending sales of U.S. existing homes hold near two-year high
The number of Americans signing contracts to buy previously owned homes held in February near an almost two-year high, a sign that the real estate market may be stabilizing.
The index of pending home purchases fell 0.5 percent to 96.5 after a 2 percent increase the prior month, the National Association of Realtors said today in Washington. January's reading of 97 was the highest since April 2010. The median forecast of 41 economists surveyed by Bloomberg News called for a 1 percent rise.
Residential real estate is recovering even amid the threat of more foreclosures, which are weighing on property values. A pickup in hiring, growing incomes and mortgage rates near a record low are making houses more affordable, driving demand.
"The improvement in employment is helping the housing market," Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. "In terms of prices, they're still going to be hurt by the foreclosures in the pipeline."
February estimates in the Bloomberg survey ranged from a drop of 1.5 percent to an increase of 5 percent.
Pending home sales are considered a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a contract closes, typically a month or two later, and made up about 93 percent of the housing market last year.
Compared with a year earlier, February pending home sales climbed 14 percent.
Three of four regions saw a decrease in pending home sales, today's report showed. That included a 3 percent decline in the South and a 2.6 percent drop in the West. The Midwest climbed 6.5 percent.
Sales of previously owned houses held in February near an almost two-year high, the real-estate agents' group reported last week. Purchases dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated and the highest since May 2010.
Even with the decline last month, January and February sales of existing homes marked the strongest start to a year since 2007.
"The spring home buying season looks bright because of an elevated level of contract offers so far this year," Lawrence Yun, the association's chief economist, said in a statement today. "If activity is sustained near present levels, existing home sales will see their best performance in five years."
Home foreclosures remain a concern for builders. Filings fell 8 percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said this month.
"February's numbers point to a gradually rising foreclosure tide," Brandon Moore, RealtyTrac's chief executive officer, said in a statement. "That should result in more states posting annual increases in the coming months."
To hold down borrowing costs like mortgage rates, Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank's holdings, a move dubbed Operation Twist.
Fed Chairman Ben S. Bernanke today said that while he's encouraged by the decline in unemployment, the central bank still needs to keep interest rates low to make further progress.
Recent "better news" on the economy has also included a "slight bit of encouraging news here and there in the housing market" and strength in manufacturing, Bernanke said in response to audience questions following a speech in Arlington, Virginia.
New-home purchases decreased 1.6 percent in February to a 313,000 annual rate, the slowest since October, the Commerce Department said last week. That pace is hurting some builders.
KB Home, the Los Angeles-based homebuilder that targets first-time buyers, fell the most in almost nine months after it reported a decline in orders and government data showed new-home sales dropped in February.
"We are seeing signs that the overall housing market is stabilizing and beginning to recover," Jeffrey Mezger, president and chief executive officer of KB Home, said in a March 23 statement. "The pace of the recovery is uneven, however. We expect that the housing market in general will gradually strengthen as the economy continues to advance."
--Editors: Carlos Torres, Vince Golle
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwelliszbloomberg.net