Pending sales of previously owned U.S. homes rose more than expected to a five-month high in March as buyers rushed to sign contracts before a popular tax credit expired, a survey showed on Tuesday.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in March, increased 5.3 percent to 102.9, building on the prior month's revised rise of 8.3 percent.
Analysts polled by Reuters had forecast pending home sales, which lead existing home sales by one to two months, rising 4 percent in March. Compared to March 2009, the index was 21.1 percent higher.
Prospective buyers had to sign contracts by the end of April and close by the end of June to be eligible for the tax break. Until recently, buyers had been slow to respond to the tax credit, which was extended and expanded last year, causing the housing market recovery to stall.
Clearly the home buyer tax credit has helped stabilize the market, said Lawrence Yun, chief economist with the NAR.
While sales started improving in March, they are not expected to match the gains witnessed with the initial tax credit. Still, analysts do not expect the housing market to slip back into the slump that helped to tip the broader economy into its worst downturn since the 1930s.
There is cautious optimism that the improving economy, particularly the return to job growth, will support sales beyond the credit.
In the months immediately following the expiration of the tax credit, we expect measurably lower sales, said Yun.
Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)