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May pending US home sales up 8.2%

By Bloomberg News
June 30, 2011

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WASHINGTON — The number of contracts to buy previously owned US homes rose almost three times as much as forecast as falling prices made properties more affordable.

The surprising 8.2 percent increase in the index of pending home resales from April followed a revised 11 percent drop the prior month, the National Association of Realtors said yesterday in Washington. Economists forecast a 3 percent gain, according to the median estimate in a Bloomberg News survey.

While the measure of contract signings has been volatile this year, last month’s index level is 0.1 point lower than the January figure, indicating residential real estate has made little headway. Foreclosures, unemployment at 9.1 percent, and stringent loan terms are holding back demand even as a decline in home prices attract some buyers.

“The market for existing homes is still extremely weak,’’ said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass. “Existing-home sales will probably improve in June based on this reading, but probably not a lot.’’

Estimates for pending home sales ranged from a drop of 4.8 percent to an increase of 15 percent, according to 36 forecasts in the Bloomberg survey. Pending sales rose 16 percent from May 2010.

Shares of homebuilders dropped after KB Home, the Los Angeles-based company that targets first-time buyers, reported a wider second-quarter loss.

A separate NAR report on June 21 showed sales of previously owned homes, which make up about 96 percent of the market, dropped in May to the lowest level in six months. Purchases decreased 3.8 percent to a 4.81 million annual rate. The median price fell 4.6 percent from a year earlier.