The pending home sales index, rose 6.7% to 90.3 in April from 84.6 in March, the largest increase in more than seven years and the third consecutive monthly increase, according to the National Association of Realtors. It was far better than an expected 0.5% increase, and is 3.2% higher than a year prior.
Pending sales, which indicate that a contract has been signed but the transaction hasn't been closed, got a boost from housing affordability conditions, low mortgage rates, and now also the $8,000 first-time buyer tax credit are beginning to impact the market, said Lawrence Yun, NAR chief economist in a release.
"[Pending home sales] were rather strong -- a lot stronger than anticipated -- and it's consistent with most of the economic data that things are improving," says Peter Cardillo, chief market economist for Avalon Partners. "In this particular case, it's on the plus side, which is good."
It certainly looks good, agreed Brian Bethune, chief U.S. financial economist at IHS Global Insight, "but the actual existing-home sales haven't really done much, so that leads me to believe that perhaps people just aren't getting approved for mortgages or there are more delays going through the process."
Last week, the NAR reported that existing-home sales increased modestly in April to 4.68 million from a downwardly revised 4.55 million in March, roughly in line with expectations. All in all, existing-home sales, including single-family, townhomes, condominiums and co-ops, increased 2.9%, while single-family home sales rose 2.5%.
But nonetheless, pending home sales could continue to increase sharply. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers," said NAR's Yun in the release on Tuesday.
"There's a lot of inventory, and no doubt that lending practices have tightened, and unless you have stellar credit you won't get approved for a mortgage," says Avalon Partner's Cardillo. "But there are a lot of people who are taking advantage; they do have good credit and are out there buying, and of course the credits that the government has given are helping."
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