The National Assn. of Realtors’ index shows purchases rose 3% in March from February and 1% from a year earlier. The Dow gains 214 points to 8,426.74.
A reported bounce in U.S. home sales Monday boosted hopes that the housing downturn was nearing its end and that the broader economy was moving toward recovery.
The National Assn. of Realtors said its pending home sales index, which tracks signed contracts for home purchases nationwide, rose 3% in March over February’s level, and was up 1% from the same month a year earlier.
The news helped to push stocks up: The Dow Jones industrial average rose 214.33 points, or 2.6%, to 8,426.74, while the Standard & Poor’s 500 index rose 29.72 points, or 3.4%, to 907.24.
The pending sales index is a leading indicator of home sales totals, which are calculated after the lengthy home purchase process is completed.
“It’s consistent with the other recent evidence of stabilization at the low end of the housing market,” said UCLA finance professor Stuart Gabriel, who directs the university’s Ziman Center for Real Estate.
The Realtor group attributed the gain to low home prices and a federal tax credit for home purchases.
“This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit,” said Lawrence Yun, the group’s chief economist. Yun said, however, that “we need several months of sustained growth to demonstrate a recovery in housing.”
The rise in the index may indicate a return to normal seasonal housing market patterns. Home sales typically rise in March from February, but last year the pending sales index dropped 1% from February, and the index of contracts in March 2008 was down 20% from March 2007.
In Southern California, the median home sale price has held steady at $250,000 from January through March -- less than half the peak median price set in 2007, according to San Diego research firm MDA DataQuick.
The sharp plunge in Southern California home prices prompted Jeffrey Mezger, chief executive of builder KB Home, to call a market bottom Monday, an assertion he also made in late March.
“If you go to Southern Cal, for example, we’re seeing a floor in pricing,” Mezger said in an analysts’ conference call Monday. “We don’t see prices going down right now, which is a good thing, because then you can set a baseline.”
KB Home constructs lower-priced homes in California and has found itself competing with previously owned homes that are in foreclosure. Various studies show higher-priced homes have not fallen as much in price in Southern California but are selling at a slower pace.
“We don’t yet really see a significant rebound in sales in those marketplaces,” UCLA’s Gabriel said of higher-priced areas. He said financing for large mortgages remains difficult to obtain, and sellers often have the means to hang on to homes rather than sell them for less than they would like.
Also boosting the stock market was news that construction spending rose slightly in March from February. Construction spending in March totaled $969.7 billion, 0.3% above the February level, according to the Census Bureau. The March total was down 11.1% from the same month a year earlier.
The rise in construction spending was not, however, due to home building. Private residential construction was down 4.2% in March from February and was 34% lower compared with March 2008.
Public construction spending in March, which was up 1.1% from February and 2.6% from March 2008, drove the total up.