Wednesday morning, the National Association of Realtors released its report on pending home sales in the month of February. The report showed an unexpected increase in pending sales, hinting at a possible pickup in sales activity in the coming months.

NAR said its index of pending home sales rose 2.1 percent to 82.1 in February from a reading of 80.4 in January. The increase by the index came as a surprise to economists, who had expected the reading to come in unchanged compared to the previous month.

Despite the monthly increase, the report showed that the pending home sales index remains 1.4 percent below a reading of 83.3 in February of 2008.

A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Lawrence Yun, NAR chief economist, said, Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we'll see additional sales gains.

The unexpected increase in pending home sales reflected strong growth in the Northeast and the Midwest, where pending sales increased by 10.6 percent and 14.5 percent, respectively.

Pending home sales in the South increased by a more modest 4.4 percent, while pending home sales in the West fell 13.5 percent.

NAR also said its Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised reading of 172.6 in January.

The drop in mortgage interest rates and home prices mean the buying power of a typical family has never been better, said NAR President Charles McMillan. If you have a good job and long-term plans, it's unlikely that you'll find a much better time to buy a home.

In other economic news, the Institute for Supply Management said its index of activity in the manufacturing sector edged up to 36.3 in March from 35.8 in February, although a reading below 50 still indicates a contraction in the sector. Economists had expected the index to rise to 36.0.

Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee said, The rapid decline in manufacturing appears to have moderated somewhat, as the PMI remains in the mid-30s for a third consecutive month.

Separately, the Commerce Department said that construction spending fell 0.9 percent in February following a revised 3.5 percent decrease in January. The drop in spending was smaller than the 1.9 decrease expected by economists.

Earlier in the day, ADP released its report on private sector employment in the month of March, showing that non-farm private employment fell by a bigger than expected 742,000 jobs following a revised decrease of 706,000 jobs in February.

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