The number of contracts to buy previously owned U.S. homes rose almost three times as much as forecast as falling prices made properties more affordable.
The surprising 8.2 percent increase in the index of pending home resales from April followed a revised 11 percent drop the prior month, the National Association of Realtors said today in Washington. Economists forecast a 3 percent gain, according to the median estimate in a Bloomberg News survey.
While the measure of contract signings has been volatile this year, last month’s index level is 0.1 point lower than the January figure, indicating residential real estate has made little headway. Foreclosures, unemployment at 9.1 percent and stringent loan terms are holding back demand even as a decline in home prices attract some buyers.
“The market for existing homes is still extremely weak,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “Existing-home sales will probably improve in June based on this reading, but probably not a lot.”
From the WSJ:
The number of people who signed contracts to buy previously occupied homes in the U.S. rose last month, but was still low from a historical perspective, as the housing market remained a weak sector of the economy.
The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes increased 8.2% on a monthly basis to a reading of 88.8, the industry group said Wednesday. It was the strongest monthly gain since last November.
Economists surveyed by Dow Jones Newswires had expected pending home sales would rise by 10.0% in May from an original April reading of 81.9. That month’s reading was revised up to 82.1.
The pending sales index for May was 13.4% above its level in May 2010, a month in which sales fell dramatically after the expiration of a federal tax credit.
The index was up 12.9% in the West on a monthly basis and 10.5% in the Midwest. It rose 7.3% in the Northeast and 4.1% in the South.