Home sales contracts leap higher

Another solid piece of news regarding homes sales emerged this week.

Contracts for the sale of existing homes rose sharply in February, possibly indicating a second surge of home sales due to the extended homebuyer tax credit, a widely watched industry report said Monday.

In the single-biggest monthly rise since October 2001, the National Association of Realtors’ (NAR) Pending Home Sales Index rose 8.2% in February to 97.6 from a downwardly revised 90.2 in January. The increase surprised economists surveyed by Briefing.com, who were expecting a 1% decrease.

Note well that this is contract data, not sales data:

The report measures signed real estate contracts, but not completed sales, for existing single-family homes, condos and co-ops. Pending home sales are considered a forward-looking indicator since many of the contracts don’t result in completed transactions for many weeks or months.

The big question is, as always, why? Are buyers responding to the impending expiration of the federal tax credit? Are buyers just a twinge more confident in their employment outlook and thus willing to take the plunge? Have prices fallen to a level that makes ownership more affordable?

One economist summed up one piece of the puzzle:

“When I step back and look at the longer-term picture, housing affordability has been restored. The plunge in prices was always the solution to the housing bust — not the problem,”

You can read more about this here.

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