Pending Home Sales Rise 3.2%, Signaling Market Near Bottom

Pending sales of existing U.S. homes rose in March for a second straight month, a private survey showed on Monday, supporting views the housing market was close to hitting a bottom.

Meanwhile, US construction spending rose a slim 0.3 percent in March in the first increase since September, according to government data that beat analysts' forecasts of a 1.5 percent drop.

AP

The National Association of Realtors Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent to 84.6. February's pending home sales index was slightly revised down to 82.0 from 82.1.

Compared to the same period a year ago, pending home sales rose 1.1 percent.

Economists polled by Reuters had forecast pending home sales to be flat in March.

NAR chief economist Lawrence Yun attributed the rise in signed contracts for home purchases to first-time buyers taking advantage of favorable affordability conditions, including an $8,000 tax credit.

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"We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around," said Yun.

The collapse of the U.S. housing market and the accompanying credit crisis dragged the economy into recession in December 2007, and analysts are watching home sales for signs of when the economic downturn might end.

The NAR's Housing Affordability Index edged down to 166.7 in March from a record 174.4 in February due to higher home prices in March.

The index was 30.8 percentage points higher than a year ago.

NAR’s Housing Affordability Index remained near record highs. The affordability index was 166.7 in March—down from an upwardly revised record of 174.4 in February due to higher home prices in March.

The index remains 30.8 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.

The Pending Home Sales Index in the South rose 8.5 percent to 93.2 in March and is 7.7 percent above a year ago. In the West the index increased 3.9 percent to 93.1 and is 1.7 percent higher than March 2008. The index in the Northeast fell 5.7 percent to 59.5 in March and is 24.1 percent below a year ago. In the Midwest the index slipped 1.0 percent to 82.3 but is 8.2 percent higher than March 2008.

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A median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest.

Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.

There were signs of weakness in the Commerce Department's report on construction spending, which totaled $970 billion at an annual rate in March.

February spending was revised to a 1.0 percent drop from the 0.9 percent decrease originally reported, and March's spending rate was 11.1 percent below that in March 2008.

Private construction dropped 0.1 percent in March, mostly from a 4.2 percent decrease in residential building, which makes up more than a third of the category.

The spending rate of $258 billion was the lowest in nearly 12 years. It was $257 billion in April 1997.

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