WASHINGTON (BLOOMBERG) - Contracts to purchase previously owned U.S. homes rose in May to a nine-year high, indicating recent strength in the real-estate industry will be sustained.
The pending home sales index increased 0.9 per cent to 112.6, the highest since April 2006, after a revised 2.7 per cent advance in the previous month, the National Association of Realtors said Monday in Washington. The median projection in a Bloomberg survey of economists called for the gauge to climb 1 per cent.
Employment growth, a pickup in incomes and relatively low borrowing costs are helping lure buyers, including those making their first foray into the market. Progress in residential real estate and more construction will further fuel the economy after a weak start to the year.
"The housing data all seem to be generally pointing in the upward direction," said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, whose forecast matched the Bloomberg survey median. "The labor market is going to help it a lot." Estimates in the Bloomberg survey of 40 economists forecasting pending home sales ranged from a 2 per cent decline to a 4 per cent increase. The Realtors' group revised the April data from an initially reported 3.4 per cent gain.
Purchase contracts rose 8.3 per cent in the 12 months ended in May, on an unadjusted basis, after a 12.6 percent gain in April, the NAR report showed.
A reading of 100 in the pending sales gauge corresponds to the average level of contract activity in 2001, or "historically healthy" home-buying traffic, according to the NAR. Pending sales climbed in two of four regions, led by a 6.3 per cent increase in the Northeast. Purchase contracts rose 2.2 per cent in the West.
"The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring," NAR chief economist Lawrence Yun said in a statement.
Economists consider pending sales a leading indicator because they track new purchase contracts. The Realtor group's existing-home sales data are tabulated when a deal closes, usually a month or two later.
Those re-sales, which make up about 90 percent of the market, rose 5.1 percent in May to a 5.35 million annualized rate, the fastest pace since November 2009, NAR data showed last week. The share of first-time buyers matched the highest level since September 2012.