Pending home sales near 2-year high

WASHINGTON Mon Feb 27, 2012 5:50pm EST

A pair of housing units are shown for sale in San Francisco, California, August 24, 2010. REUTERS/Robert Galbraith

A pair of housing units are shown for sale in San Francisco, California, August 24, 2010.

Credit: Reuters/Robert Galbraith

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WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes neared a two-year high in January, an industry group said on Monday, further evidence the housing market was slowly turning the corner.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in January, increased 2 percent to 97.0 - the highest reading since April 2010. New contracts generally lead sales by a month or two.

Housing data ranging from home building to resale's have been relatively upbeat, buttressing other signs of underlying economic strength that should help the U.S. recovery better handle rising gasoline prices and a recession in the euro zone.

The housing market is becoming less of a drag on the economy and home construction is expected to add to growth this year for the first time since 2005.

"Clearly we had better weather conditions in January that might have helped, but we have a situation where we are seeing a number of housing statistics turn," said Michael Strauss, chief economist at Commonfund in Wilton, Connecticut. "It suggests housing is going to be an additive to GDP this year."

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Graphic on Jan U.S. pending home sales: link.reuters.com/kyv76s

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HOUSING HEALING

December's pending home sales index was revised to show a much smaller 1.9 percent drop instead of the previously reported 3.5 percent decline. In January, new contracts were up 8.0 percent from their year-ago level.

The rise in last month's index suggested home resales would increase for a second consecutive month in February, and it also bodes well for the spring sales season.

"This spring we expect to see continued forward momentum in the housing market as excess inventory is absorbed and low-cost mortgage debt becomes more prevalent," said John Tashjian, principal at Centurion Real Estate Partners in New York.

"A strong spring housing season will be a critical indicator toward predicting growth in the housing market for 2012."

The market has been hampered by an oversupply of unsold homes, but the number of both new and previously owned properties for sale has been whittled down in recent months.

But with the foreclosure tide yet to recede and continuing to depress prices, recovery will be a long, drawn-out affair. A report due on Tuesday is expected to show that prices in 20 U.S. metropolitan areas tracked by S&P/Case Shiller fell by 0.5 percent in December after declining by 0.7 percent in November.

Yelena Shulyatyeva, an economist at BNP Paribas in New York, said the housing market has likely received some recent support from buyers hoping to lock in mortgages before loan guarantee fees charged by housing finance firms Fannie Mae and Freddie Mac go up in April.

Pending home sales rose strongly in the Northeast and South, but fell in the Midwest and West.

Shulyatyeva cautioned that not all of the sales would likely go through. "Recently, existing home sales have been running much lower than pending sales as one third of them currently end up in a contract failure," she said.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Comments (6)
Harry079 wrote:
With record low interest rates and home prices down where they are you would think the homes sales would be up much more than they are.

A nice little two bedroom home down the street from me just sold for $24,000 where in 2008 would have got closer to $60,000.

The house next to me has been empty for over a year. This home was completely redone and the contractor who owns it can’t even get the money out he put into it.

Such is they way that things are.

Feb 27, 2012 11:05am EST  --  Report as abuse
jmmx wrote:
Where do you live? Here you need to add another 0. And prices here have also fallen – but not by 60%

Feb 27, 2012 12:23pm EST  --  Report as abuse
There is NO real estate market in the United States. Patient known as RE is in Intensive Unit Care breathing under respiratory and eating through the tube. OK technically it is not dead but not alive either.
Whether patient will survive without organ support: zero interest rates, bailing out home owners, adminitrative/legal boundaries to millions of foreclosures is still the question. Demographics had changed, so I think recovery in RE market in US not in this decade.
BTW, all this bailing out: judicial, fincial etc. only prolonges time till market equilibrum.

Feb 27, 2012 2:24pm EST  --  Report as abuse
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