Home sales contracts leap higher

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Contracts for the sale of existing homes rose sharply in February, the National Association of Realtors' (NAR) said Monday.

In the single-biggest monthly rise since October 2001, pending home sales rose 8.2% in February. Economists were expecting a 1% decrease.

It was also a 17% improvement over February last year. The unexpected increase could indicate demand driven by the federal government's homebuyer tax credit, NAR said.

Buyers have to ink contracts by the end of April to take advantage of the tax credit, which offers first-time homebuyers up to $8,000, and those who are trading up as much as $6,500.

NAR's report measures signed real estate contracts, but not completed sales, for existing single-family homes, condos and co-ops. Pending home sales are considered a forward-looking indicator since many of the contracts don't result in completed transactions for many weeks or months.

The tax credit is not the only factor driving home sales: Improved consumer confidence and lower unemployment numbers are also likely to push the number higher over the next few months, said Robert Dye, a senior economist with PNC Financial Services.

"A lot of economic indicators are starting to move back into positive territory, and I think we're going to see a good number of homebuyers come into the market to take advantage of very favorable home prices, low mortgage rates and the tax credit," he said.

On the flip side, there was a 16% drop-off in pending home sales in November, as homebuyers looked ahead to the initial Nov. 30 deadline of the tax credit. It was later extended to April 30. After surging July through October, pending home sales contracts fell during the winter months, real estate's slowest season.

Similarly, Dye said pending home sales could decline following the April 30 deadline of the tax credit. But an improved jobs picture could offset the drop-off effect.

"Right now, everything points to the labor market. What we need to see is continued strength in private sector job creation," he said.

A report released last week by the S&P/Case-Shiller Home Price Index of 20 cities showed that home prices have fallen for four consecutive months, following a five-month run-up in prices starting last spring.

Analysts don't expect a sharp rise in home prices any time soon, as foreclosed homes continue to enter the marketplace. But cheap homes and low-rate financing are gradually bringing out buyers, said Mike Larson, a real estate and interest rate analyst at Weiss Research.

"When I step back and look at the longer-term picture, housing affordability has been restored. The plunge in prices was always the solution to the housing bust -- not the problem," he said.

According to NAR, pending home sales rose the most in the Midwest, where they were up 21.8% in February from the month before. Both the South and Northeast saw an increase of around 9%. Home sales contracts fell 4.8% from month-to-month in the West, but still fared 14.6% better than last year in that region. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,071.22 -41.93 -0.25%
Nasdaq 4,505.85 -6.34 -0.14%
S&P 500 1,977.80 -5.05 -0.25%
Treasuries 2.49 -0.04 -1.74%
Data as of 2:09am ET
Company Price Change % Change
Ford Motor Co 15.11 -1.22 -7.47%
Bank of America Corp... 17.01 -0.02 -0.12%
Apple Inc 100.11 -0.64 -0.64%
Yahoo! Inc 40.52 -0.14 -0.34%
Facebook Inc 79.00 0.21 0.27%
Data as of Sep 29

Sections

This is Wal-Mart's latest move to build up its online presence as it struggles to compete with retailers like Amazon. More

As demonstrations continue to disrupt normal operations in Hong Kong, both experts and residents are considering the long-term impact that the pro-democracy protest will have on the international finance hub. More

CNNMoney's Jose Pagliery breaks down the shellshock vulnerability and explains which devices could be affected. More

On Wednesday, 17% of First Green Bank's 66 employees will get a raise under the company's new "living wage" program. The guarantee: At least about $30,000 a year. More

Despite service that 'sucked,' an Iowa couple leaves a $100 tip for the waiter to prove a point about kindness and the life of a waiter in America. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.