Pending sales of previously
owned homes rose for a second straight month in March, while
construction spending edged higher, according to reports on Monday that
suggested a moderation in the housing slump.
reports boosted U.S. stocks and lent support to the view that the
recession, now in its 17th month, was close to finding a bottom.
balance, it's an encouraging set of news. Pending home sales tell us,
as far as the housing sector is concerned, we are getting near the
bottom, Nigel Gault, chief U.S. economist at IHS Global Insight in
The National Association of Realtors
said its Pending Home Sales Index, based on contracts signed in March,
rose 3.2 percent to 84.6 as first-time buyers waded into the market to
take advantage of favorable prices and mortgage rates.
from the Commerce Department showed U.S. construction spending rose 0.3
percent in March, the first increase in six months.
market's gains came from homebuilders' shares, as reflected by the Dow
Jones U.S. home construction index, up 6.8 percent, and from banking
stocks. Investors are betting government stress tests for banks won't
compel them to raise large amounts of capital, which could dilute
Government bond prices inched higher
after the Federal Reserve bought a bigger-than-expected amount of
longer-dated Treasury securities to keep borrowing costs lower and help
Other recent data showed the pace of decline in
sales of new and previously owned homes was moderating while
manufacturing was improving.
The pending home sales report added
to evidence that sales have reached a bottom, Michael Darda, chief
economist at MKM Partners in Greenwich, Connecticut, said.
critical because once sales bottom, it's only a matter of time before
you work off excess inventories. That's the key to stabilization in the
financial system and the economy at large. We're closer to that than
people thought just a few months ago, said Darda.
FIRST-TIME BUYERS TO THE RESCUE
collapse of the U.S. housing market and the resulting credit crisis
pushed the economy into recession and analysts have watched home sales
for signs of an end to the downturn.
NAR Chief Economist Lawrence
Yun attributed the rise in signed contracts for home purchases to
first-time buyers taking advantage of the combination of low prices and
mortgage rates, as well as an $8,000 tax credit, which made housing
We need several months of sustained growth to
demonstrate a recovery in housing, which is necessary for the overall
economy to turn around, said Yun.
The NAR's Housing
Affordability Index edged down to 166.7 in March from a record 174.4 in
February due to higher home prices in March. The index was 30.8
percentage points higher than a year ago.
The index is a broad
measure of housing affordability linking the relationship between home
prices, mortgage interest rates and family income.
Department report said that while construction spending rose, private
construction slipped, mainly on a 4.2 percent decrease in residential
I think in coming months we will start to see the
residential side flattening out, said IHS Global Insight's Gault. We
are still holding for fourth-quarter recovery (in the economy), (but)
it's possible it could come sooner.
increased 1.1 percent after gaining 1.3 percent in February. Most of
the boost came from state and local governments.
remain skeptical that the economy will recover later this year's,
arguing that the government's $787 billion package of increased
spending and tax cuts will be insufficient to turn around the economy.
Monday's data is consistent with the second-half recovery scenario
currently being reflected in markets, said Steven Ricchiuto, chief
economist at Mizuho Securities USA in New York.
But I continue
to hold on to the 2010 recovery forecast on the assumption that the
benefits from the Obama stimulus package will fail to assure a
self-sustained upturn in the economy.