WASHINGTON - More Americans signed contracts to buy homes in March, the first increase since June and a sign that the housing market is picking up after a sluggish start to the year.
The National Association of Realtors said Monday that its seasonally adjusted pending home sales index rose 3.4 percent to 97.4 last month. Still, the index remains 7.9 percent below its level a year ago.
Pending sales are a barometer of future purchases: A one- to two-month lag usually exists between a signed contract and a completed sale.
The gain partly reflects a recovery from the harsh winter. Snowstorms and freezing temperatures kept many potential buyers away from open houses in January and February.
Housing demand has weakened since the middle of last year as rising prices and borrowing costs put ownership out of reach for some prospective buyers. An improving employment outlook and easier access to credit would help entice more house hunters to sign purchase contracts.
“The backdrop in general for housing remains reasonably positive,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y., who projected a 2.5 percent gain. “The labor market is improving, confidence generally has been edging up and mortgage rates are still pretty low.”
Estimates in the Bloomberg survey of 35 economists ranged from a 2 percent decline to a 7 percent increase after a previously reported 0.8 percent drop in February.
Still, the rise in pending sales means that home sales could rebound during the spring-buying season.
Monday’s report comes after two dismal sales reports last week suggested that sales and construction would increase only modestly this year.
Sales of existing homes fell in March to their lowest level since July 2012, the Realtors group said last week. It was the seventh drop in eight months. At the same time, fewer Americans are applying for mortgages, a sign of weaker demand. The Mortgage Bankers Association’s mortgage applications index fell 3 percent last week from the previous week.
Sales of new homes plunged14.5 percent in March to the slowest pace in eight months, according to a report from the U.S. Commerce Department last week. A jump in prices contributed to the decline.
Higher mortgage rates have also weighed on sales. Rates are about a percentage point higher than they were a year ago. The average rate for a 30-year fixed mortgage was 4.33 percent in the week that ended Thursday, compared with 3.4 percent a year earlier, according to Freddie Mac.
“The March increase … comes as a relief,” said Jennifer Lee, an economist at BMO Capital Markets. “The weather-related housing pickup is still on track.”
Purchase contracts fell from the previous year after a 10 percent decrease in the 12 months that ended in February on an unadjusted basis. Existing home sales are projected to total just over 4.9 million this year, less than the 5.1 million in2013, the trade group said.
The pending sales index was 97.4. A reading of 100 is equal to the average level of contract activity in 2001, according to the Realtors group.
Three of four regions showed an increase from February, with contract signings up 5.7 percent in the West, 5.6 percent in the South and 1.4percent in the Northeast. Pending sales dropped 0.8 percent in the Midwest.
Economists watch the pending sales report for clues to existing-home sales, which are tabulated when a contract closes a month or two after being signed.
“After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers,” Realtors Association chief economist Lawrence Yun said in a statement. “Sales activity is expected to steadily pick up as more inventory reaches the market, and from ongoing job creation.”
Harsh winter weather at the beginning of the year further slowed housing as snow and frigid temperatures stalled construction and kept some buyers indoors. A pickup in housing demand may prove difficult as first-time buyers struggle to obtain credit and builders design new homes fora higher-end market.
Diminished sales haven’t made houses any cheaper. Builders including PulteGroup Inc. and D.R. Horton Inc. are raising prices, and fewer are targeting first-time buyers.
At M/I Homes Inc., a Columbus, Ohio-based single family homebuilder, the average price of properties under contract rose to $326,000 this year from $290,000 a year ago, Chief Executive Officer Bob Schottenstein said.
“While we continue to believe that housing is in the early stages of a multiyear recovery, the spring selling season has gotten off to a slower-than-expected start,” Schottenstein said on an earnings call Thursday.
“We continue to believe that we’re in the early stages of a housing recovery that will last a number of years,” he said. “We’re optimistic not just about our business, but we’re optimistic about macrohousing conditions.” Information for this article was contributed by Lorraine Woellert and Ainhoa Goyeneche of Bloomberg News and Christopher Rugaber of The Associated Press.
Business, Pages 23 on 04/29/2014