Pending home sales rise 3.2% in March

Construction spending up for first time in six months

(WASHINGTON) There was another ray of hope yesterday for the distressed housing market: the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose for the second month in a row.

Also, construction spen-ding rose in March for the first time in six months, edging up 0.3 per cent, according to government data yesterday.

The gain contrasted with analysts' forecasts of a 1.5 per cent drop in spending, but there were signs of weakness in the Commerce Department's report, which showed spending reached US$970 billion at an annual rate in March.

However, public construction, which had tapered off in winter, increased 1.1 per cent in March and 1.3 per cent in February. Most of the boost came from state and local governments where spending rose 1.3 per cent in March.

The economic recovery bill passed in February included billions of dollars for capital projects, and this could be the first indication some of the funding has reached the US economy.

The US$309 billion rate of public construction spending was 2.6 per cent higher than in March 2008.

Homebuyers taking advantage of bargain prices, low interest rates and a tax credit for first-time buyers pushed the seasonally adjusted index of pending sales up by 3.2 per cent to 84.6 in March.

The results not only beat analysts' flat expectations, but were also 1.1 per cent above last year's levels, the first time that has happened since December.

'After nearly three years of freefall, housing activity may have found a floor,' wrote Paul Dales, US economist with Capital Economics in Toronto.

The index tracks signed contracts to purchase previously occupied homes. Typically there is a one to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.

Hopes have been growing that home sales, while still severely depressed, may be finally showing signs of life. Sales of newly built homes were flat in March while sales of existing homes edged down slightly.

But it's not all bright news out there.

Home prices are expected to keep falling for at least another year, though at a slowing pace.
Tens of thousands of homes are tied up in the foreclosure process and not yet for sale. Plus, mounting job losses may keep many buyers from signing a contract for a home.

The Realtors estimate about half of existing home sales are now foreclosures and other must-sell transactions. -- AP, Reuters

Source: Business Times, 5 May 2009