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The National Association of Realtors said on Tuesday Feb 2 that its Pending Home Sales Index, based on contracts signed in December, rose 1.0 percent to 96.6 after falling sharply in November when a boost from the initial tax credit for first-time buyers ebbed.
The gain in the index, which leads sales of previously owned homes by one to two months, was in line with market expectations. Compared to December 2008, the index was up 10.9 percent.
The small monthly rise in the pending home sales index suggests existing home sales were flat to weaker in January, analysts said. Existing home sales dropped to their slowest sales pace in four months in December.
"There is still no evidence of a significant rebound in home sales. The pending home sales index implies existing home sales will be little changed between December and January," said Abiel Reinhart, an economist at JPMorgan in New York.
Separately, the percentage of homes standing empty rose to 2.7 percent in the final three months of 2009 from 2.6 percent in the third quarter, the Commerce Department said. The rate has risen for the last two quarters.
The reports had little impact on U.S. financial markets. U.S. stocks rose after economic bellwether United Parcel Services forecast a sharp increase in 2010 earnings. Prices for U.S. government debt were little changed.
TAX CREDIT DISTORTS MONTHLY DATA
Monthly housing data has been distorted by the first tax credit, which saw prospective home owners pushing forward purchases to beat the initial November deadline.
Although the tax credit was subsequently expanded and extended until June, a lull in sales followed, causing economists to question the sustainability of the housing market's recovery without government support.
A raft of weak housing reports for December fanned worries that the housing market, at the center of the worst economic downturn since the Great Depression, could take a step back and harm the broader economic recovery.
New home sales, which analysts said had seen a marginal boost from the tax credit, also fell in December. Investment in new home building slowed sharply in the fourth quarter and made a smaller contribution to economic growth than in the third quarter, government data showed last week.
The Federal Reserve said on Monday most US banks stopped raising the bar for borrowers at the end of last year and even made it easier for consumers to get some loans.
The U.S. central bank, however, also noted that banks continued to tighten standards on residential real estate loans in the fourth quarter, a factor that could generate some bumps for the housing recovery.
While analysts reckon home sales will bounce back in the months ahead because of the extension and expansion of the tax credit, they do not expect them to set the same pace as that achieved during the initial program.
"The second 'segment' will be in effect for a shorter time than the first," said Anna Piretti, an economist at BNP Paribas in New York. "The January to November program likely borrowed some strength from the future as prospective buyers rushed into the market before its expiration, arguing for a moderation in the pace of home sales."
A cautious note on the housing market was also sounded by D.R. Horton , one of the top five U.S. homebuilders, which reported a first-quarter profit because of a large tax credit.
"Market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, and weak consumer confidence," said chairman Donald Horton.
The US homeownership rate fell to 67.2 percent in the fourth quarter from 67.6 percent in the third quarter, the Commerce Department report showed. It was the lowest since a matching 67.2 percent in the second quarter of 2000. - Reuters
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