More Americans signed contracts to buy previously owned homes in June, a sign that lower prices are drawing buyers into the market.
The index of pending home resales unexpectedly rose 5.3% after a revised 4.9% decline in May, the National Association of Realtors said Thursday. The gain was the third this year.
"What we're getting is a little bit of foreclosures thrown in with voluntary home sales," said John Silvia, the chief economist at Wachovia Corp. "Although foreclosures are up, there seems to be enough of a price decline that buyers are starting to look for bargains and they're willing to purchase."
The median of 37 economists' forecasts in a Bloomberg survey was a 1% drop in the index, after the initially reported 4.7% decrease in May. The June estimates ranged from a drop of 3% to a 3.5% gain.
Pending resales were down 12% from June 2007, the report showed.
The measure rose in all four regions of the country, led by a 9.3% gain in the South. Purchase contracts also rose 4.6% in the West, 3.4% in the Northeast, and 1.3% in the Midwest. Compared with a year earlier, though, contract signings remained down in all four regions.
"Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices," Lawrence Yun, the Realtors' group's chief economist, said in a press release. "In addition, rising commodity prices and higher construction costs have resulted in a very unusual market, with existing-home prices being less than replacement building costs in some areas."
The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures for July existing-home sales are due Aug. 25. Purchases in June fell 2.6%, to a 4.86 million annual pace, the lowest level in a decade, from the 4.99 million May rate. At the June sales rate, it would take 11.1 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the Realtors.
"As long as housing is a negative portion of the economy, and I think that could well happen and continue to happen until, say, the beginning of 2009, it's hard for me to get really optimistic about a pickup" in growth, Robert Parry, a former president of the Federal Reserve Bank of San Francisco, said in an interview Tuesday.
Other measures are still signaling that sales may keep dropping. The Mortgage Bankers Association's index of applications for loans to buy a house reached a five-year low at the end of July.
D.R. Horton Inc., the largest U.S. home builder, this week reported its fifth straight quarterly loss. The Fort Worth company recorded $330.4 million of pretax expenses to write down property values and abandon scheduled land purchases.
"We're continuing to cut at all levels," chief executive officer Donald Tomnitz said during a conference call with analysts on Tuesday. Foreclosures continue to "cloud" the housing market, he said.
