June 10, 2008

Surprise jump in US pending home resales

WASHINGTON - THE number of Americans signing contracts to buy existing homes jumped unexpectedly in April, signalling that lower prices are making real estate more affordable, a private report showed.

The index of pending home resales rose 6.3 per cent to 88.2, the highest level in six months, following a 1 per cent drop in March, the National Association of Realtors said yesterday.

Lower property values may be starting to lure some buyers who are able to qualify for loans, suggesting that purchases will improve next year.

Still, stricter lending rules, a recent increase in mortgage rates, and continued pressure on prices from mounting foreclosures will likely keep some buyers away for much of the year.

'There are some signs that sales are close to a bottom, although the level of inventories is so high that there is going to be continued pressure on prices and housing starts,' said Mr James O'Sullivan, a senior economist at UBS Securities in Stamford, Connecticut. 'We'll need to see more than this report to suggest housing is really rebounding.'

The index was expected to fall 0.4 per cent, according to the median forecast in a Bloomberg News survey of 32 economists.

Stocks extended gains following the report and US Treasury securities dropped.

Pending resales were still down 13 per cent from April last year, the report showed.

'Bargain hunters entered the market en masse, especially in areas that have experienced double-digit price declines, but it's unclear if they are investors or owner-occupants,' said Mr Lawrence Yun, the chief economist at the National Association of Realtors.

He also said the drop in consumer confidence and stricter lending rules made the immediate outlook unclear.