Pending home sales rise narrowly

WASHINGTON (Reuters) - Pending sales of existing U.S. homes rose above analysts' expectations in February, data from a real estate trade group showed on Tuesday, a signal that the housing sector may be stabilizing.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in February, rose 0.7 percent to 109.3 from a downwardly revised 108.5 in January.

Wall Street analysts polled ahead of the report were expecting the index to come in at 108.2.

The stronger-than-expected data helped boost Wall Street stocks and sparked gains among shares of home builders.

With many market-watchers fretting over a shaky mortgage sector, the data offered a welcome sign of stability, said Mario DeRose, a fixed-income strategist with Edward Jones in St. Louis.

"This is a nice surprise that, basically, reduces the chance that we will get a dramatic drop in housing," he said.

Others still see uncertainty for the housing and mortgage finance sectors.

Higher delinquencies among subprime borrowers with damaged credit will put downward pressure on homes sales this year, said David Lereah, NAR's chief economist.

"Problems in the subprime mortgage market will become more apparent over time, and they will modestly depress the overall level of improvement in existing-home sales we expect as the year progresses," Lereah said.

Poor February weather probably helped flatten Tuesday's data, but the pending home sales figure has largely held steady since July, he said.

Jon Basile, an economist with Credit Suisse of New York, said the data "gives a feel that existing home sales have stabilized because they are higher than the lows of last year. At the very least, housing demand is not getting any worse."

A sale is listed as pending when the contract has been signed but the transaction has not been closed. Sales are usually finalized within one or two months of signing.