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US Pending Home Sales Rise less than Forecast in April: NAR

H.S. Borji
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US Pending Home Sales Rise less than Forecast in April: NAR

Contracts to buy existing homes edged up slightly in April, underscoring the housing recovery’s modest rebound at the start of the second quarter.

The pending home sales index increased 0.4 percent in April, following a 3.4 percent gain the prior month, the National Association of Realtors reported today. The median estimate of economists called for an increase of 1 percent.

Year-on-year, pending home sales were down 9.2 percent, following a decline of 7.9 percent in the 12 months to March.

Contract signings rebounded for the second straight month in April, after falling to the lowest level in nearly three years in February. Pending home sales declined at an annualized rate of 10.5 percent in February, the NAR showed.

Pending home sales are a key indicator of the housing market, allowing economists to forecast the pace of existing home sales, which are based on contract closings.

“Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” said NAR chief economist Lawrence Yun in a press release. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”

Today’s release follows a series of other reports about the housing sector indicating activity had picked up moderately at the start of the second quarter. Existing home sales rebounded from a 20-month low in April, advancing 1.3 percent to a seasonally adjusted annual rate of 4.65 million. The sale of new US homes increased 6.4 percent to a seasonally adjusted annual rate of 433,000.

Housing starts rose 13.2 percent to 1.072 million, and building permits – a gauge of future residential construction intentions – advanced 8 percent to 1.08 million, the highest level since 2008.

However, builder confidence has remained subdued since February, reflecting trends in current sales and a subdued outlook. The National Association of Home Builders’ gauge of homebuilder confidence declined from 46 to 45 in May, falling further into pessimistic territory.

Affordability has been a key challenge for the housing market, which hit a roadblock last summer around the time when mortgage rates began climbing. Yun expects the 30-year fixed-rate mortgage to rise to 5.5 percent next year. Whether or not this impacts sales will depend on income growth and improvement in the labour market, Yun also added.

Jobs growth averaged 238,000 per month between February and April, offering hope the labour market was recovering at a moderate rate following an abrupt slowdown in December and January. The Labor Department is scheduled to post May nonfarm payrolls next Friday. Economists forecast another strong month of jobs gains for May.

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