WASHINGTON Pending sales of previously owned U.S. homes shot up by 6.7 percent in April, the biggest monthly gain in 7-1/2 years, according to a report on Tuesday that buttressed views the U.S. recession was easing.
And separate reports showing that U.S. auto sales fell by about 30 percent in May from last year provided another glimmer of optimism, with sales looking likely to beat analysts' modest expectations for the battered sector
The National Association of Realtors said its Pending Home Sales Index, based on new sales contracts, rose to 90.3 in April from 84.6 in March.
It was the third straight monthly increase and the largest jump since October 2001. The gain took the index 3.2 percent above its year-ago level, compared with economists' expectations for a rise of just 0.5 percent.
"It's a very positive and encouraging number. It plays into the 'green shoots,' economy stabilization story," said William Hornbarger, senior fixed income strategist at Wachovia Securities in St. Louis.
The blue-chip Dow Jones industrial average rose for the fourth straight day on the housing news, with the Dow Jones home builder index gaining 2.7 percent.
The dollar, a safe-haven currency that tends to fall when investors move into riskier assets, slid against the euro to a fresh low for the year on confidence that the worst of the recession was over. Prices for U.S. government bonds edged higher on bargain hunting.
While sales of existing homes have increased in recent months, nearly half involve properties that have gone through foreclosure or which have been sold for a loss -- evidence of the sector's underlying weaknesses.
Tuesday's autos data showed that industry-wide sales for the month were on track to top 10 million units on the annualized basis tracked by analysts -- a better result than most economists had expected.
BOND YIELDS MENACE HOUSING
A measure of housing affordability by the National Association of Realtors, based on home prices, mortgage rates and income, has reached record territory, with 30-year mortgage rates hovering near record lows with an abundance of homes on the market.
But waning investor appetite for U.S. government debt that has pushed yields on the 10-year Treasury note sharply higher last week also threatens to drive up mortgage costs. Mortgage rates tend to move in tandem with yields on benchmark bonds.
Yields on the 10-year note reached as high as 3.75 percent last week, the highest level since mid-November.
"Since (the Realtors') data was recorded, mortgage rates have started to move back up. That is something to be wary of going forward," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
The Federal Reserve has promised to invest $1.75 trillion to help push down borrowing costs.
HOUSING, CONFIDENCE UP
The deep downturn in the U.S. housing market touched off a global credit crisis that sent economies worldwide tumbling into recession. Now, signs are emerging that the global economy is beginning to heal.
An Ipsos/Reuters poll of 23,000 people in 23 countries found global consumer confidence was stabilizing after falling for 18 months, another hopeful sign for the world economy.
Lawrence Yun, senior economist at the Realtors' trade group, credited improved home affordability and a new government program that provides an $8,000 tax credit for first-time homebuyers for the surge in U.S. buying activity.