Pending Home Resales Rise 5.3% In June

Source : The Business Times, August 8, 2008

Lower prices draw buyers back into housing market

(WASHINGTON) More Americans unexpectedly signed contracts to purchase previously owned homes in June, a sign that lower prices are drawing some buyers back into the market.

The index of pending home resales rose 5.3 per cent after a revised 4.9 per cent decline in May, the National Association of Realtors said yesterday here. The gain is the third this year.

Plummeting property values, spurred by mounting foreclosures, may be helping to stabilise the market by making houses more affordable.

Still, repossessions may keep growing as stricter lending rules make it harder for owners to refinance their mortgages.

'Home sales have been boosted by the sharp price falls, which have been related to the large number of foreclosed properties,' David Sloan, senior economist at 4Cast Inc in New York, said before the report.

Economists had projected the index would fall one per cent after a previously reported 4.7 per cent decrease in May, according to the median of 37 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3 per cent to a 3.5 per cent gain.

Pending resales were down 12 per cent from June 2007, yesterday's housing report showed.

The measure last month increased in all four regions of the country from May, led by a 9.3 per cent gain in the South.

Purchase contracts also rose 4.6 per cent in the West, 3.4 per cent in the Northeast and 1.3 per cent in the Midwest. Compared with a year ago, contract signings remained down in all four regions.

'Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,' Lawrence Yun, the agents' group chief economist, said in a statement.

'In addition, rising commodity prices and higher construction costs have resulted in a very unusual market with existing home prices being less than replacement building costs in some areas.'

The pending resales report is considered a leading indicator because it tracks contract signings.

Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors. -- Bloomberg