Signed contracts to buy U.S. homes rose more than forecast in March as low interest rates drew buyers back into the market.
The index of pending home purchases rose 4.1 percent to 101.4, the highest level since April 2010, after a 0.4 percent gain in February that was revised from a previously estimated 0.5 percent drop, the National Association of Realtors reported today in Washington. The median forecast of 43 economists surveyed by Bloomberg News called for a 1 percent rise in the measure, which tracks contracts on previously owned homes.
An improved labor market and mortgage rates near historic lows are helping to stabilize housing. At the same time, the industry remains the economy’s weakest link, depressed by the threat of more foreclosures, stricter lending standards, and lower property values.
“It’s good news,” said Sean Incremona, senior economist at 4Cast Inc. in New York. “It does suggest that improvement in the housing market is continuing.”
Estimates for March pending sales ranged from a drop of 3.7 percent to an increase of 4 percent in the Bloomberg survey.
Stocks climbed after the figure, with the Standard & Poor’s 500 Index rising 0.1 percent to 1,392.57 at 11:33 a.m. in New York. The S&P Supercomposite Homebuilders (S15HOME) Index increased 2.1 percent. PulteGroup Inc. rallied 5.1 percent after the homebuilder’s loss was less than forecast.
Pending home sales are considered a leading indicator of progress in real estate 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, March pending home sales climbed 10.8 percent after a 14.9 percent surge in February.
Two of four regions saw an increase in pending home sales from the prior month, led by an 8.7 percent jump in the West, today’s report showed, while the South posted a 5.9 percent gain.
Housing is showing uneven signs of progress. This week, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, reported a February increase in home prices, up 0.4 percent from a year earlier, the first annual gain since July 2007.
The S&P/Case-Shiller index of property values fell 3.5 percent for the year ended in February.
Sales of previously owned houses in March fell for the third time in four months, from a 4.6 million annual rate to 4.48 million, the National Association of Realtors reported earlier this month.
Demand for new homes also dipped in March. Homes sold at a 328,000 annual rate, down from an upwardly revised 353,000 in February, which was the highest in almost two years, the Commerce Department reported.
To hold down borrowing costs, Federal Reserve policy makers say 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.
“Despite some signs of improvement, the housing sector remains depressed,” Federal Reserve officials said in a policy statement yesterday.
Underlying the uneven housing numbers is an overall improvement in consumer confidence, said Farooq Kathwari, chief executive officer of Ethan Allen Interiors Inc. (ETH:US)
“I would go mad, crazy,” looking at housing data every day, Kathwari said in an April 24 earnings call. “So I don’t look at them every day because I’ve got to plan three, six months, a year from now,”
The home furnishings company, based in Danbury, Connecticut, reported an 8 percent year-over-year increase in net sales for the quarter ended March 31, to $175.9 million. “Three, four years back we decided to build a 240,000 square foot plant in Mexico. If we had not done it, we would not be able to deliver the products we have,” Kathwari said.
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