US pending home sales pick up in December

US pending home sales pick up in December
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: February 2 2010 16:44 | Last updated: February 2 2010 16:44
http://www.ft.com/cms/s/0/c3c24978-1012-11df-841f-00144feab49a.html


US pending home sales stabilised in December after plunging sharply the month before, reflecting the swings in activity created by government support for the housing market.

The National Association of Realtors said on Tuesday that pending home sales, which reflect deals that have been signed but not completed, edged up by 1 per cent last month compared with the month before, in line with Wall Street expectations. Sales were up 10.9 per cent from the same month a year ago.

In November pending home sales plunged by 16.4 per cent, as buyers pulled back in anticipation of the first-time homebuyer tax credit expiring. It was later extended and expanded to expire in April.

“There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” said Lawrence Yun, NAR’s chief economist. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels.”

According to NAR, which projects a rise in existing home sales in 2010, home prices will “firm” along with increases in sales this year.

The recent volatility in the residential real estate market shows how fragile the sector remains and the impact of stimulus measures, which “pulled forward” purchases. Economists expect a lull in sales during the winter months and then another surge ahead of the April expiration of the tax credit.

Some analysts, such as Mike Larson, a real estate of Weiss Research, are less optimistic about the housing market than NAR. He argues that the market is likely to “muddle through” in the coming months as it benefits from low mortgage rates and cheap prices but copes with foreclosures and tight lending standards.

In December, sales rose in the northeast, the south and the midwest, but fell in the west.

Separately on Tuesday, the commerce department said that during the fourth quarter of 2009 the vacancy rate for homes in the US ticked up to 2.7 per cent from 2.6 per cent in the third quarter. Meanwhile, rental vacancies slipped to 10.7 per cent from 11.1 per cent, as people have shifted from owning to renting while the market remains volatile.