Last week wasn’t a good one for the housing market. You wouldn’t know it this week, and the spate of good reports bode well for the months ahead.
Pending home sales, a measure of contracts that have been signed (but not finalized) for home purchases, climbed 3.4 percent in April, according to the National Association of Realtors’ (NAR) monthly index. That’s well beyond the 0.8 percent economists were expecting, and the measure has seen a 13.3 percent rise since April 2014 – its biggest year-over-year gain since September 2012. The NAR’s index is at its highest point since May 2006.
Regions hit hard by harsh winter weather earlier this year led the charge, because home purchases in those areas were delayed. Pending sales in the northeast surged 10.1 percent, followed by a 5 percent increase in the Midwest.
The flurry in activity was also due to more buyers competing for fewer available homes, according to NAR chief economist Laurence Yun. “Homeowners looking to sell this spring appear to be in the driver's seat,” he said in Thursday’s report. "As a result, home prices are up and accelerating in many markets."
The results followed Tuesday’s bang-up report for new home sales, which increased an unexpected 6.8 percent in April. New home sales are a much smaller slice of the overall market than existing home sales, which were so disappointing last month that it begged questions about the health of the economy at large.
But analysts were encouraged by the fact that the acceleration in prices for new homes largely kept pace with price increases in April. “This indicates strong demand, which will incentivize new construction,” IHS Global Insight economists Patrick Newport and Stephanie Karol wrote in an e-mailed report.
A tight supply of available homes, as well as prices rising well out of reach for many Americans, have slowed the housing market’s recovery over the past year or so. Encouraging builders to ramp up construction could serve to ease both issues, and it may be already: new construction on homes jumped 20.2 percent from March to April .
Meanwhile, the strong pending home sales numbers could mean that April’s existing sales report wasn’t actually as bad as first reported, says MFR, Inc. economist Joshua Shapiro. “The April pending sales index points to a jump in actual sales in May, and also suggests that the recent report of weaker than expected April sales could well be revised up,” he writes in an e-mailed analysis.
None of that means things are back to normal: home prices are still climbing much faster than people’s wages, and despite the uptick in groundbreakings, there still aren’t enough completed homes to ease inventory constraints. But the overall direction is at least the right one.