The number of Americans signing contracts to buy previously owned homes climbed 6.7 percent in April, the fourth increase in five months, as lower prices attracted buyers. The gain in the index of signed purchase agreements, or pending home resales, was the biggest in seven years and followed a 3.2 percent increase in March, the National Association of Realtors said today in Washington. The April reading was up 3.2 percent from the same month a year earlier. Foreclosure-driven declines in values and tax incentives may put more homes within reach of first-time buyers, helping to stabilize the market and stemming the biggest drag on economic growth. Still, with mortgage rates no longer dropping and unemployment climbing, the real-estate industry may flounder near recent lows for months before a sustained recovery. “Home sales are stabilizing,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report. “We’ve stopped falling, but as of yet there are few signs that we’ve started recovering. The end of the decline is the first step.” Economists forecast the index would rise 0.5 percent in April, according to the median of 32 projections in a Bloomberg News survey. Estimates ranged from a 2 percent drop to an increase of 4 percent. Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005. Regional Gains Three of four regions saw an increase in pending sales, today’s report showed, led by a 33 percent jump in the Northeast and a 9.8 percent gain in the Midwest. Pending resales rose 1.8 percent in the West and fell 0.2 percent in the South. The agents’ association reported last week that home resales increased 2.9 percent in April, buttressing the case that the industry’s slump, now in its fourth year, would end in 2009. The median price dropped 15 percent from a year earlier, the second-biggest decline on record. Sales gains have been most pronounced in areas such as California and Florida where foreclosures have surged, indicating the drop in prices is stimulating demand. In addition, the Obama administration’s economic stimulus plan provided an $8,000 tax credit for first-time home buyers for purchases completed before Dec. 1. Affordability Index The Realtors group’s affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 176.9 in January. The index was at 174.8 in April, the second-highest ever. Readings greater than 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs. The market is nearing “equilibrium” as inventory shrinks and homes become more affordable, billionaire property investor Sam Zell said last week in a Bloomberg Television interview. “We never would have gotten into the position we’re in today if everybody was focusing on where they wanted to live and what was a good value for living as opposed to what they could buy it and flip it for,” said Zell, chairman of Chicago-based Equity Residential, the largest publicly traded apartment company in the U.S. Builder shares have rebounded in tandem with other stocks on growing speculation the housing market may be steadying. The Standard & Poor’s Supercomposite Homebuilding Index is up 27 percent over the last three months compared with a 28 percent increase for the S&P 500. Borrowing Costs Still, an improving economic outlook has pushed up borrowing costs, raising concern the real-estate industry will not rebound. The average rate on a 30-year fixed mortgage climbed to 4.91 percent last week, according to figures from Freddie Mac. The rate had reached a record-low 4.78 percent in April. “Home-purchase activity could wallow at moribund levels,” said Scott Anderson, a senior economist at Wells Fargo & Co. in New York. The emerging “green shoots” of recovery may be stamped out, “forcing us to yet again downgrade out outlook for the economy,” he wrote in a May 29 note to clients. A weak job market is another reason economists say any rebound in housing would be slow to develop. The unemployment rate, which reached a 25-year high of 8.9 percent in April, may climb to almost 10 percent by the end of 2009, according to the median forecast of economists surveyed by Bloomberg last month. Rising defaults and foreclosures are likely to also keep property values under pressure for months, making buying a home a risky proposition. The U.S. mortgage delinquency rate jumped to 9.12 percent in the first quarter, and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said last week. Both figures were the highest in records going back to 1972.

Source