The National Association of Realtors reported that pending home sales jumped 2.1% in February. Though encouraging, economists think it’s important to look at long-term performance due to the uneven recovery. Learn more about this in the full article from The Street.
Pending home sales jumped 2.1% in February, according to a National Association of Realtors report released Monday morning.
An index that measures the number of contracts signed to buy previously owned homes in the U.S. jumped 2.1% in February month-over-month to a reading of 90.8, reversing a 2.8% decline in pending home sales in January. The figure remained 8.2% below year-earlier levels.
Economists had expected the figure to edge up just 0.3% after pending home sales tumbled 2.8% in January.
Pending home sales are viewed as an indicator of future home sales since they reflect contracts — not closings — and generally occur with a lag time of one to two months.
"Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer-term performance," said NAR chief economist Lawrence Yun.
"Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20% above the low point immediately following expiration of the home buyer tax credit."
Yun added that poor weather across much of the U.S. in February pressured home sales.
"All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity," he said.
"We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5% to 10% this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines," Yun said.
Data released last week showed that existing-home sales dropped 9.6% in February to a far worse-than-expected seasonally adjusted annual rate of 4.88 million units, according to the NAR.
February’s rate of home resales remained 24.8% below the cyclical peak of 6.49 million units in November 2009, which was the initial deadline for the first-time homebuyer tax credit, and 2.8% below the home resale rate in February 2010.
"Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers," Yun said, commenting on the existing-home sales data.
Also last week, the Commerce Department a reported that sales of newly built homes plunged 16.9% in February to a seasonally adjusted annual rate of 250,000, a far bigger jump than expected and the worst rate on record since 1962.
February’s new-home sales figure remained 28% below year-earlier levels. Every U.S. region, save for the West, saw record lows last month. The Northeast saw sales drop 57% month-over-month.
The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.
The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones U.S. Home Construction (ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.
Even so, better-than-expected pending home sales data pushed most homebuilder stocks higher on Monday.
Among individual builders, PulteGroup (PHM) rose 1.2%, D.R. Horton (DHI) added 1.3%, and Beazer Homes (BZH) jumped 2.2%.
Laggards included Lennar (LEN), down 0.8%, and KB Home (KBH), off by 0.1%.
This article was republished with permission from The Street.