Contracts for existing homes up 6%

The number of contracts to buy previously owned homes climbed in April as Americans took advantage of the last month of a tax credit.
The index of pending home resales rose 6 percent, exceeding the median forecast of economists surveyed by Bloomberg News, following a revised 7.1 percent gain in March, the National Association of Realtors said last week in Washington. The gauge reached the highest level since October.
A plunge in mortgage applications signals sales will soften in subsequent months following the April 30 deadline to sign contracts and obtain as much as $8,000 in government assistance. Any sustained recovery in housing hinges on maintaining stability in financial markets and gains in employment in the wake of the European debt crisis.
“It’s going to take a big dive,” Patrick Newport, a housing economist at IHS Global Insight in Lexington, Mass., said before the report. Later in the year, “low interest rates, low housing prices and job growth are going to start giving the housing market sustained growth, but at really low levels.”
Sales were projected to rise 5 percent in April after an originally reported gain of 5.3 percent in March, according to the median of 40 forecasts in the Bloomberg survey. Estimates ranged from a 3 percent drop to an increase of 10 percent.
The group, which has pending sales data dating back to January 2001, started publishing the index in March 2005. February’s 8.3 percent gain was the biggest since 2001.
Three of four regions saw an increase, last week’s report showed. That included a 30 percent jump in the Northeast, a 7.5 percent rise in the West and a 4.1 percent gain in the Midwest. Pending purchases declined 0.6 percent in the South.
Compared with April 2009, pending sales were up 25 percent.
The tax credit for first-time homebuyers, which helped fuel a rebound in demand last year, was extended in November and expanded to include some current owners. It required buyers to sign contracts by the end of April and close by June 30.
Pending home resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in the Realtors’ existing-home sales report.
Sales of existing homes, which account for about 90 percent of the housing market, rose 7.6 percent in April to the highest level in five months, the association reported May 24. Demand may keep rising through June, the deadline to close a deal and receive the tax credit.
New-home purchases, which make up the rest of the market and are tabulated when a contract is signed, jumped 15 percent in April after surging 30 percent the prior month, Commerce Department figures showed on May 26.
A report late last month showed loan applications for home purchases dropped to the lowest level since April 1997, according to figures from the Mortgage Bankers Association.
Americans with jobs and good credit can take advantage of more than a tax credit. Average home prices were down 31 percent in March from their July 2006 peaks, according to the S&P/Case Shiller 20-city index, and 30-year mortgage rates are near record lows on concern the European debt crisis may slow global growth.
The rate on a fixed 30-year mortgage fell to 4.78 percent in the week ending May 26, according to Freddie Mac. The rate reached a record-low 4.71 percent in December.
Foreclosures will remain a headwind for the housing industry after the expiration of the tax credit. While they drive down property values and make homes affordable to more buyers, they also add to inventory, increase competition for builders and create uncertainty for buyers. &#8226