Springtime for Home Sales
The pending homes sales index rose to a seasonally-adjusted 97.6 in February. That's up from 90.2 in January, according to the National Association of Realtors.
The increase surprised experts who predicted home shoppers would stay home this February -- after all, the snow storms across much of the East Coast and Midwest were fingered for a drop in transactions in February. Economists surveyed by Thomson Reuters had predicted the index would fall slightly to 90.3.
The February report most likely marks the beginning of a mini-housing boom, at least compared to the doldrums of the past few months, as the warmer weather and expiration of the federal new home tax credit lure shoppers out into the market again.This time the good times will probably last... at least until the end of the month. Qualified homebuyers who have signed contracts by April 30 to purchase a home will receive an $8,000 federal tax credit.
The pending home sales index counts people who have signed contracts to buy homes. Usually these contracts turn into completed sales within two months. An index value of 100 represents the sales activity in 2001, the year the index started.
The uptick follows last week's report of an increase in mortgage applications by the Mortgage Bankers Association.
But the news is still a disappointment for anyone hoping for a repeat of mini-housing recovery late last year. The pending home sales index rose for most of last year, from a low of 80.4 in January to the peak of 112.4 in October, just before an earlier $7,500 federal homebuyer tax credit expired at the end of November. Just for some perspective, October's peak was just a hair less than its peak of 115.2 in March 2006, at the height of the housing boom.
Congress immediately extended and expanded the tax credit through April 30, but the pending sales index fell anyway, crashing back to 97.0 in November and kept falling through January to bottom at 90.2.
The February index reading of 97.6 is good news, but it's still far below 107.8, where the index was in September 2009, two months before the last expiration.
So enjoy it while it lasts. There's not much time between the end of February and the April 30 expiration for homebuyers to see houses and sign contracts. Like cherry blossom season, the boom is likely to be short lived.