Sharp Rise in Home Sales in February

Sharp Rise in Home Sales in February
By JAVIER C. HERNANDEZ
Copyright by The New York Times
Published: April 5, 2010
http://www.nytimes.com/2010/04/06/business/economy/06econ.html?hp


The wobbly housing market showed a rare sign of strength on Monday: pending home sales were up significantly in February, a report said, suggesting that Americans took advantage of a tax credit for home buyers.

Sales rose 8.2 percent in February, the National Association of Realtors said, while analysts had expected sales to stay flat.

Economists said Monday’s data suggested buyers were re-entering the market as the April 30 deadline approached for a government tax credit of up to $8,000. The credit drove up sales rapidly in the fall, when it was originally set to expire, but it has been slow to propel the market this spring.

Lawrence Yun, chief economist for the association, said Monday’s report “may signal the early stages of a second surge of home sales.”

“We need a second surge to meaningfully draw down inventory and definitively stabilize home values,” Mr. Yun said in a statement.

A separate report on Monday showed the service sector in the United States was improving, driven in part by gains for employment.

The Institute for Supply Management’s non-manufacturing barometer rose to 55.4 in March, up from 53 in February, exceeding expectations. Much of the momentum came from a surge in new orders and business activity.

It was the highest reading for the survey since May 2006. While employment rose, it was short of the break-even point, signaling the service sector was still losing jobs. Exports also rose significantly.

“This is a very encouraging report, which indicates acceleration in demand growth from both domestic and foreign customers,” Barclays Capital researchers wrote in a note on Monday.

The jump in pending home sales was a rare bit of good news for the housing market, which remains in a deep rut. Home prices have shown little change and foreclosures are rising as Americans fall behind on mortgage payments.

Analysts expect the housing market to gradually improve as unemployment recedes and the broader recovery gains steam. But so far, relief has been slow to come.

Monday’s report showed sales rose even in areas hit hard by poor weather in February. Sales climbed 9 percent in the Northeast and South, which were blanketed by snow in February.

The Realtors association bases its data on signed contracts, which usually take one or two months to translate into final sales.