New report bolsters US housing hopes

New report bolsters US housing hopes
By Sarah O’Connor in Washington
Copyright The Financial Times Limited 2009
Published: May 4 2009 16:32 | Last updated: May 4 2009 16:32
http://www.ft.com/cms/s/0/d73f4f0e-38be-11de-8cfe-00144feabdc0.html


More Americans signed contracts to buy homes in March than economists expected, according to private data released on Monday, bolstering hopes that low mortgage rates and cheap prices could be helping to stabilise the housing market.

The number of people signing contracts to buy existing homes rose 3.2 per cent in March from the previous month, according to an index produced by the National Association of Realtors, and was up 1.1 per cent from the same period last year. Economists expected the index to be flat, and the surprise rise boosted the shares of house-building companies.

However, the increased activity was concentrated in the south and west of the country, where the index rose 8.5 per cent and 3.9 per cent respectively. In the north-east and mid-west, it fell by 5.7 per cent and 1 per cent respectively.

Lawrence Yun, chief economist at NAR, said the uptick could have been caused by first-time buyers drawn in by some of the most affordable houses for 30 years. But he warned that it did not necessarily mean the housing market had bottomed: “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around,” he said.

The index fell to a record low in January but has risen steadily since then – although it remains firmly below the levels seen in 2007 as the market first began to topple. It is seen as a leading indicator because people tend to sign contracts several months before sales actually go through.

“Things certainly look a bit less bad than in the dark days at the turn of the year,” said Ian Shepherdson, chief US economist at High Frequency Economics.

Separate data on Monday showed US construction spending rose in March for the first time in six months, edging up 0.3 per cent on the previous month, though the increase was attributable to public construction projects rather than private ones.

There have been flickers of life in the housing market over recent months, and many hope that the sector that sparked the credit crisis will eventually lead the wider economy out of recession.

The drop in house prices slowed in February, for example, for the first time since 2007, while sales rose. NAR’s “affordability index” rose in that month to the highest since records began. In March the index fell back slightly, but remained more than 30 percentage points above the previous year.