Pending home sales rise 6.7 percent in April

The number of home buyers who agreed to buy a previously occupied home took the largest monthly jump in nearly eight years in April, but there are still plenty of danger signs for the U.S. housing market.

Home sales appear likely to head upward this summer, potentially to levels not seen since the stock market collapsed last autumn, but prices are expected to keep falling well into next year. Layoffs, which are causing foreclosures to soar, coupled with rising mortgage rates could dampen any real estate recovery.

The National Asn. of Realtors said Tuesday that its seasonally adjusted index of sales contracts signed in April surged 6.7% to 90.3, far exceeding analysts’ forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2%.

The big boost reflects the effect of a new $8,000 tax credit for first-time buyers that was included in the economic stimulus bill signed by President Obama in February. Since buyers need to complete their purchases by Nov. 30 to claim the credit, “we expect greater activity in the months ahead,” Lawrence Yun, the Realtors’ chief economist, said in a statement.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.

Even though economists are encouraged by signs that demand for housing is returning, the outlook is far from sunny. Mortgage rates are rising, making homes less affordable for many borrowers. The average rate for a 30-year fixed-rate mortgage is around 5.3% this week compared with about 5% last week, according to Bankrate.com.

The health of the U.S. housing market, mired in a three-year slump, is one of the key issues facing the economy. Though sales may be recovering, analysts cautioned that prices would take longer to stabilize because of the glut of unsold properties for sale. Prices are unlikely to rise until foreclosures start declining, and that’s unlikely to happen before the end next year.