Pending home sales seen at recent high

Contract index rises 1.7% in November

— A measure of Americans who signed contracts to buy homes increased last month to its highest level in 2 1/2 years, the latest sign of improvement in the housing market.

The National Association of Realtors said Friday that its seasonally adjusted pending home-sales index rose 1.7 percent in November from October to 106.4. That’s the highest since April 2010, when a homebuyer tax credit caused a spike in sales. And after excluding those months when the tax credit was available, it’s the best reading since February 2007.

“Housing is building some momentum,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pa. “There is a growing perception that now is a good time to buy. Prices are starting to tick up, mortgage rates are still rock bottom and the job market has shown some signs of improvement.”

The increase followed a 5 percent gain in October and suggests higher sales of previously occupied homes in the coming months.

There’s generally a oneto two-month lag between a signed contract and a completed sale.

In November, signed contracts to buy homes rose in the Northeast and West, and ticked up slightly in the Midwest. They were unchanged in the South.

Home sales are on track to rise 10 percent this year to their highest level in five years, buoyed by ultralow mortgage rates and steady job gains. The Realtors group forecasts that sales may rise in 2013 to about 5.1 million. That’s still below the more than 5.5 million considered consistent with a healthy market.

The housing recovery that began earlier this year is looking sustainable for a number of reasons. The supply of previously occupied homes for sale has finally thinned out and is at an 11-year low. At the same time, more people are looking to buy or rent a home after living with relatives or friends after the recession.

The combination of stronger demand and limited supply is pushing up home prices. That could encourage more sellers to put their homes on the market because they can expect a better price.

Builders also are more optimistic that the recovery will endure and are stepping up construction. The pace of home construction was nearly 22 percent higher in November compared with a year earlier.

Builders are on track this year to start work on the most homes in four years, taking advantage of strong demand and tight inventory by breaking ground on new communities and raising prices. Toll Brothers Inc. and KB Home are reporting stronger traffic at their sales offices.

“New demand is now being created due to increased urgency to take advantage of incredible affordability as prices are now on the rise,” KB Home Chief Executive Officer Jeff Mezger said on a Dec. 20 earnings call. “While it’s been a few years in the making, housing is becoming a bright spot for the economy and the industry is once again positioned to play its historical role of being a job creator and leading the national economy into a full recovery.”

Information for this article was contributed by Lorraine Woellert of Bloomberg News.

Business, Pages 25 on 12/29/2012

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