Pending home sales rise 5.2%
The uptick is better than expected, with gains in all four US regions.
By Miriam Reimer, TheStreet
The National Association of Realtors said Thursday that its index of contracts to buy previously owned homes in the U.S. rose 5.2% in July.
The increase was better than expected, with gains in all four regions. Economists had expected the index to fall by 1.1% to a reading of 74.9, from a downwardly revised 2.6% decline in June.
The pending home sales index plunged 29.9% in May and 2.8% in June after the April 30 expiration of federal tax credits for homebuyers.
While the July index came in better than expected, sales in the month remained 19.1% lower than in July 2009.
Pending home sales are considered a good barometer of future existing-home sales. There is typically a one- to two-month delay from when contracts are signed till when home sales are closed.
Adding to the already dismal outlook for the U.S. housing market, new-home sales fell 12.4% in July to a new record-low rate of 276,000, the Commerce Department reported last week. The figure also came in well below expectations, representing a 32.4% decline from year-earlier results and the weakest month on record. Sales were strongest in the South and weakest in the Northeast.
The S&P/Case-Shiller 20-city index of national home prices rose higher than expected in the second quarter, according to data released early Tuesday.
Nationwide home prices rose 4.4% in the second quarter after a 2.8% drop in the first quarter. A federal tax credit for homebuyers of up to $8,000 is largely credited with strengthening home sales last spring as buyers rushed to push up their purchases before the credits expired April 30.
Record-low and near-record-low mortgage rates have failed to spark demand for housing in recent months, but they clearly have had an effect on homeowners looking to lower their monthly payments.
Mortgage applications rose 2.7% last week, the Mortgage Bankers Association said Wednesday, led by a 2.8% rise in refinance applications. Loan applications for home purchases rose 1.8% in the week.
Refinancing applications were at their highest rate since May 2009, making up 82.9% of all mortgage applications last week, up from 82.4% in the week prior.
The average rate for a 30-year fixed loan fell to a new record-low rate of 4.43%, from 4.55% a week earlier.
In an effort to keep people in their homes, the Obama administration plans to offer $1 billion in zero-interest loans to homeowners who have lost income and are facing foreclosure. The measure is part of $3 billion in additional aid targeted at areas deemed economically stressed.
The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers.
After the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July showed a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.
Stocks in the homebuilder sector reacted quickly, and most moved higher. The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, rose 1.8%. The iShares Dow Jones US Home Construction (ITB) gained 1.6%. NVR (NVR) rose 1.1%, PulteGroup (PHM) 1% and M.D.C. Holdings (MDC) 0.7%.
Ryland (RYL) bucked the trend, falling 0.8%. Hovnanian Enterprises (HOV) jumped 2.5%. The builder said early Wednesday it narrowed its quarterly losses even as signed sales contracts for newly built homes tumbled 37%.
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