The number of contracts to buy previously owned homes in the U.S. rose in June for a fifth straight month and exceeded economists' forecasts, as lower prices and mortgage rates attracted buyers.
The 3.6% gain in the index of signed purchase agreements, or pending home resales, followed a 0.8% gain the prior month that was larger than previously estimated, the National Association of Realtors said Tuesday.
Foreclosure-driven declines in home values and tax incentives are putting houses within reach of first-time buyers, helping to stabilize the real estate market.
At the same time, with mortgage rates no longer dropping and unemployment still rising, it may be months before a sustained recovery in housing takes hold.
"It's a modest recovery, however these numbers are exceeding people's expectations," said David Sloan, a senior economist at 4Cast Inc. in New York. He was one of three forecasters who shared the highest projection in a Bloomberg News survey.
But even though there are "genuine signs" of recovery in housing and manufacturing, "the consumer is still the big sort of worry," Sloan said. Economists forecast the index would increase 0.7%, after an originally reported 0.1% gain in May, according to the median of 35 projections in the Bloomberg survey.
Estimates ranged from a 1.2% drop to a 3% gain.
Pending resales are considered a leading indicator because they track contract signings.
The Realtors' report on sales of existing homes 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. All four regions in the U.S. had an increase in pending sales, Tuesday's report showed, led by a 7.1% gain in the South and a 2.9% increase in the West.
"Activity has been consistently much stronger for lower-priced homes," Lawrence Yun, the Realtors' chief economist, said in a press release, noting that first-time buyers must have their contracts close by Nov. 30 to get an $8,000 tax credit.
The association said July 23 that home resales in June rose for a third straight month, supporting the case that the industry's downturn, now in its fourth year, will end in 2009.
Sales of new homes soared 11% in June, the most since 2000, according to Commerce Department data released July 27.
The Realtors' affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 178.8 in April. The index was at 159.2 in June. Readings above 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs.
M.D.C. Holdings Inc., the Denver parent of the builder Richmond America Homes, said July 31 that its orders had increased on a quarterly basis for the first time in four years.