NEW YORK Pending sales of previously owned U.S. homes in April unexpectedly saw their biggest monthly gain in 7-1/2 years, a report from a trade group on Tuesday showed, buttressing views the U.S. recession was easing.
* The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in April, rose 6.7 percent in April to 90.3 from 84.6 in March.
* It was the biggest monthly increase since October 2001 and it took the index 3.2 percent above its year-ago level in the latest sign the battered U.S. housing sector was stabilizing.
* Economists polled by Reuters ahead of the report were expecting pending home sales to rise 0.5 percent. The downturn in the U.S. housing market touched off a global credit crisis that sent economy's worldwide tumbling into recession. Now, signs are emerging that the global economy is beginning to heal.
* The association's senior economist, Lawrence Yun, credited improved home affordability and a new government program that provides an $8,000 tax credit for first-time homebuyers for the surge in buying activity.
* The NAR said its Housing Affordability Index, which blends factors like home prices and mortgage rates, was "in record territory" with 30-year mortgage rates hovering around 5 percent and an abundance of homes on the market.
BERNARD BAUMOHL, CHIEF GLOBAL ECONOMIST, THE ECONOMIC OUTLOOK
GROUP, PRINCETON, NEW JERSEY:
"Based on what we just heard, we are now formally calling for the end of the housing depression and that we increasingly think that the housing market is beginning to turn up."
"We have now seen pending home sales up three months in a row and we have also had the prices of existing home sales also increase three consecutive months. We are seeing for the past year inventories of new and existing homes decline and that includes even the amount of foreclosure in the market. All signs are pointing to a bottoming out now of the housing market."
"The only danger and the only risk there is if we see Treasury yields on 10-year securities begin to move up, and there is a real risk that that could happen."
NIGEL GAULT, CHIEF U.S. ECONOMIST AT GLOBAL INSIGHT IN
"I think it seems to be a combination of tax incentives, lower house prices and record low mortgage rates. It is good news to see improvement in the sales because up to now most of the benefit of the low mortgage rates really affected refinancing rather than purchases. This sharp increase is encouraging and we'll have to see what happens over the next two to three months now that mortgage rates are back up somewhat."
WILLIAM SCHULTZ, CHIEF INVESTMENT OFFICER, MCQUEEN, BALL &
ASSOCIATES, BETHLEHEM, PENNSYLVANIA:
"It remains to be seen how long the impact will be sustainable. If it's going to be sustainable we have to not see the continuation of rising mortgage rates. That could really be the fly in the ointment of the housing sector. In general the economic news has been less negative, so we're clearly bouncing off the bottom of negative news.
"Short term, obviously, a little positive today, because we continue to get yet another piece of information to suggest the worst is behind us, but longer term I think it's going to be slower growth, slower gains in the stock market, until we get some more information that really gives us confidence that the turnaround has taken place."
"The impact on the dollar is really going to come from the need for the Treasury to raise capital to support these programs, so I expect the dollar will continue to slide as we see more issuance of Treasury securities."
JOHN SPINELLO, CHIEF FIXED-INCOME TECHNICAL STRATEGIST,
JEFFERIES & CO, NEW YORK:
"The jump in pending home sales took the bond market down. If the housing market is bottoming, that exacerbates the pressure on Treasuries. This is only one piece of data but some other data have shown some stability. With the bond market having a negative bias and stocks rolling to the upside, if you want to consider the stock market as a forward-discounting mechanism for the economy, right now the path of least resistance for bonds is to the downside in prices and upside in rates. I think we'll take out 3.75 percent on the 10-year yield and probably that yield will move toward four percent some time during the next two Treasury refundings."
KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH, GFT FOREX, NEW
"Pending home sales increased for the third month in a row as deep discounting enticed bargain hunters. We expect existing and new home sales to see similar strength in the coming months as lower prices help to move inventory.
"Unfortunately the stronger housing market report will not stop investors from bailing out of U.S. dollars. The only thing that can stop the decline in the dollar at this point are official comments from central bankers."
WARREN SIMPSON, MANAGING DIRECTOR, STEPHENS CAPITAL
MANAGEMENT, LITTLE ROCK, ARKANSAS:
"I think it's obvious that all the numbers are telling us that things are a little better, whether they will last is the big question. I've said all along that I did think that home sales were about to hit the bottom or if they hadn't already, they were close. We've just about got that in a position where we can see an improvement in the housing market. Everything else that goes with that - commercial real estate - we still have a ways to go. It's like anything else, I think inventories are about to get under control. That's the best way I can put it, inventory is about to get right."
BRUCE BITTLES, CHIEF INVESTMENT STRATEGIST,ROBERT W. BAIRD &
CO., NASHVILLE, TENNESSEE:
"It's better than expected. I'd say it's indicative of what's been going on in terms of housing affordability. With prices dropping and mortgage rates dropping, affordability has really sky-rocketed.
That is "good news for the economy in general because I don't think the economy can make it unless home prices eventually stabilize."
STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH,
"Again (this is) coming in with a lot of the anecdotal evidence that on the margin, things continue to improve.
"All this evidence that things are stabilizing, possibly the recession ending shortly, has historically bode well for stock prices."
OMER ESINER, SENIOR CURRENCY ANALYST, TRAVELEX GLOBAL BUSINESS
"Pending home sales have eclipsed market forecasts. The resulting improvement in risk appetite should support riskier assets such as stocks and commodities and weigh on the dollar. The report has further added to negative sentiment on the dollar. That said, it's too early to say that we have turned the corner. But it has become apparent that the worst of the credit crisis has passed and that should sap safe-haven demand for the dollar."
DAVID MORRISON, MARKET STRATEGIST, GFT GLOBAL MARKETS, LONDON:
"The collapse of the housing market was the catalyst for the financial crisis, so this stronger number will add to the increased optimism that is flowing through the stock markets at the moment."
WILLIAM HORNBARGER, SENIOR FIXED INCOME STRATEGIST, WACHOVIA
SECURITIES, ST. LOUIS, MISSOURI
"It's a very positive and encouraging number. It plays into the 'green shoot', economy stabilization story."
JIM AWAD, MANAGING DIRECTOR, ZEPHYR MANAGEMENT, NEW YORK:
"This is our third monthly increase, and it really supports the bullish case. I've been expecting a reality check for a while, but as evidence comes in, all we're really seeing is improvement and stabilization. I thought the market had got ahead of the fundamentals, but as the fundamentals come out they support the case for the bulls. I think is going to be incredibly good for the markets today, and it looks like what's going to happen is that by the time it's clear we're in a recovery, the stock market will be fully valued, which is what makes this business so difficult and humbling."
LAWRENCE GLAZER, MANAGING PARTNER, MAYFLOWER ADVISORS, BOSTON:
"We are seeing that the decline in mortgage rates over the past few months has had a beneficial effect initially on the housing market. However, since this data was recorded, mortgage rates have started to move back up. That is something to be wary of going forward."
MARKET REACTION: STOCKS:
U.S. stock indexes rallied. BONDS: U.S. Treasury debt prices pulled back. DOLLAR: U.S. dollar fell against the euro, but rose against the yen.