A forward-looking index of housing demand surged well beyond expectations in April, leading markets to shoot up half an hour into the open.
The Pending Home Sales Index ― which looks at contracts that have been signed, but not finalized ― shot up 6.7% in April, far above the +0.5% consensus expectation, and following a 3.2% gain in March.
“Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit,” said the press release from the National Association of Realtors.
Since April 2008, the index has improved 3.2%, indicating that claims of housing market stabilization could be justified. In addition to housing, the index is valuable in measuring general momentum in the economy.
“This is yet another positive indication that the bottoming process is forming,” said Jennifer Lee from BMO Capital Markets. “Now if only prices would stabilize.”
Looking ahead, NAR chief economist Lawrence Yun said signings should increase over the summer and into the fall.
“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
Regionally, results were mixed, led by a whopping 32.6% monthly advance in signings in the Northeast. The Midwest saw a 9.8% gain, and the West saw a rise of 1.8%. In the South, signings edged down 0.2%.
On another positive note, the report said the Housing Affordability Index rose to its second highest monthly reading on record.