Pending Home Sales Post Big Jump

By:: Peter King | April 05, 2010

Pending home sales posted a healthy increase in February, reversing three months of weak sales, according to figures released today by the National Association of Realtors (NAR).

Signed contracts for home sales rose 8.2 percent on a seasonally adjusted basis, a sign that the extended homebuyers’ tax credit may be bringing buyers back into the market. On an annual basis, pending sales were up 17.3 percent from February 2009.

“The rise in buyer contact activity may signal the early stages of a second surge of home sales this spring,” said Lawrence Yun, NAR chief economist. “The healthy gain hints home prices are continuing to flatten. We need a second surge to meaningfully draw down inventory and definitively stabilize home values.”

Yun said there are indications of rising buyer interest in recent weeks, with increasing reports of properties receiving multiple offers in various markets, suggesting that March’s report could show continuing improvement.

It was the second-biggest monthly gain since the NAR began tracking the data and the largest recorded since October 2001.

The pending home sales report reflects signed sales contracts, which tend to predate actual sales by about two months.

The figures suggest that buyers are moving to take advantage of the extending and expanding homebuyer’s tax credit, which Congress passed in November. Pending sales plummeted by 17 percent in November as the original deadline approached for finalizing sales to qualify for the credit, and remained weak through December and January.

If buyers are responding to the extended credit, however, it raises the question of whether sales can be extended after it expires. To qualify for the credit, home sales contracts must be signed up April 30 and sales closed by June 30.

Pending sales posted their strongest increase in the Midwest, with signed sales contracts up 21.8 percent from January and up 18.7 percent from one year before. Pending sales in the Western region of the country, on the other hand, actually fell by 4.8 percent from the previous month, though remaining up 14.8 percent on an annual basis.

Pending sales in the South and Northeast closely tracked national averages, showing monthly increases of 9.2 percent and 9.0 percent, respectively, and annual gains of 18.7 and 18.9 percent.

The NAR’s Pending Home Sales Index currently stands at 97.6, on a scale in which a rating of 100 equals the average level of sales contracts signed in 2001.

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