Pending Home Sales Edge Up Despite Subprime Market Woes

A gauge of sales trends for previously owned homes rose 0.7% in February, according to the National Association of Realtors - showing limited effects from the bad weather in February and a decline in subprime lending.
By: Jeff Bater: The Wall Street Journal Online
A gauge of sales trends for previously owned homes rose in February, though it remained well off year-earlier levels.

The National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 0.7% to 109.3 in February from January's 108.5, the industry group said Tuesday. Its index, based on signed contracts for used homes, was 8.5% below the level of February 2006.

"If it wasn't for the unusually bad weather in February, we'd be seeing a better performance in pending-home sales," NAR chief economist David Lereah said. "We also may be seeing some fallout from a decline in subprime lending, but a slight improvement in the more volatile month-to-month index is encouraging - the data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify."

Mr. Lereah added, "Problems in the subprime mortgage market will become more apparent over time, and they will modestly depress the overall level of improvement in existing-home sales we expect as the year progresses."

By region, the index showed a 1.3% decline in the Northeast in February from January - and an 8.2% decrease since February 2006. The index increased 2.9% in the Midwest - but was down 9.7% in the 12-month span. The South saw a 4.5% rise - and an 8.0% decline in the past year. The index for the West fell by 6.0% - and was 8.2% lower since February 2006.

The NAR's pending home sales index was designed to help gauge which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.

Existing-home sales unexpectedly climbed in February, rising to a 6.69 million annual rate, the NAR said. Weather was seen as a factor, and subprime mortgage woes could reduce some demand down the road. Inventories of homes rose 5.9% in February to 3.75 million available for sale.