Pending home sales rose 7.4% in August from July, an unexpected piece of positive news for the battered U.S. housing market.
The National Assn. of Realtors said Wednesday that its seasonally adjusted index of pending sales for existing homes rose to 93.4 from an upwardly revised July reading of 87. The reading was the highest since June 2007.
Home sales are considered pending when the seller has accepted an offer but the deal has not closed. Typically there is a one-to-two-month delay before a sale is completed.
Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 84.9. The index, which sank to a record low of 83 in March, stood at 85.8 in August 2007.
Home sales are picking up in places that have seen the most severe price declines, including California, Florida, Nevada and Arizona, plus Rhode Island and the Washington, D.C., area, said Lawrence Yun, the trade group's chief economist. Still, Yun does not expect home prices to rebound until next year and expects only a modest gain of 2% to 3% in 2009.
A major unknown is how the worldwide financial crisis and economic slump will affect the housing market.
Despite numerous efforts by the Federal Reserve to encourage banks to lend more, lenders have kept tight reins on mortgage financing, and average rates on 30-year mortgages have remained over 6% for most of the year.
The latest effort came Wednesday, when the Fed and six other major central banks around the world slashed interest rates in an attempt to prevent a mushrooming crisis from becoming a global economic meltdown.