Spring Buying Takes Hold as Pending Home Sales Rise

Been waiting for the spring homebuying season to hit? According to a new industry report released Wednesday, it may be settling in.
[IMAGE] The ""National Association of Realtors"":http://www.realtor.org (NAR) says contracts in place for sales of existing homes rose 8.2 percent in May compared to the trade group's upwardly revised reading for April and are 13.4 percent higher than in May 2010.

The ""data reflects contracts"":http://www.realtor.org/wps/wcm/connect/RO-Content/ro/research/research/phsdata but not closings, which normally occur with a lag time of one or two months.

May's monthly gain is the strongest increase since last November when the index rose 10.6 percent.

Commenting on the latest results, ""Radar Logic"":http://www.radarlogic.com says while some observers may interpret the month-over-month increase as a sign of improvement in the nation's housing markets, it remains ""circumspect.""

The company, which tracks home price trends for markets across the country, points out that May's gains appear substantial in part because they come off weak pending sales figures for April, when NAR reported an 11.6 percent month-over-month drop in its pending home sales index.

Radar Logic says when May's pending sales figures are put into their larger context, it's evident that the index has

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remained essentially flat relative to the beginning of the year.

Still, NAR says its latest reading marks the first time since April 2010 that contract activity has come in above year-ago levels.

May 2010 was marked by a sharp drop-off in home sales contracts, immediately following the deadline for buyers to cash in on the federal homebuyer tax credit.

But NAR says May's gains point to higher housing activity in the second half of the year.

Lawrence Yun, NAR's chief economist, notes that some markets have made a rapid turnaround, with contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Connecticut; Indianapolis, Indiana; Minneapolis, Minnesota; Houston, Texas; and Seattle, Washington.

""Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,"" Yun said.

All regions of the country posted healthy gains in pending home sales last month.

The pending sales index in the Northeast rose 7.3 percent between April and May and is 4.4 percent above a year earlier.

In the Midwest the index jumped 10.5 percent on a monthly basis and is 17.2 percent higher than May 2010.

Pending home sales in the South saw a 4.1 percent monthly increase and are up 14.6 percent from a year ago.

In the West the index surged 12.9 percent month-over-month and is 13.5 percent above May 2010.