Instant View: Pending home sales hit 6-month high – Tyler Vernon – Reuters
NEW YORK | Wed Jun 2, 2010 10:24am EDT
NEW YORK (Reuters) – Pending sales of previously owned U.S. homes hit a six-month high in April, as prospective home owners took advantage of a popular homebuyer tax credit, a survey showed on Wednesday.
KEY POINTS: * The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in April, increased 6.0 percent to 110.9, the highest since October. * It was the third straight month of gains in the index, which leads existing home sales by a month or two. Pending home sales rose by a revised 7.1 percent in March, a figure previously reported as a 5.3 percent increase. * Analysts polled by Reuters had forecast pending home sales rising 5.0 percent in April. Compared to April 2009, the index was 22.4 percent higher.
DAVID DIETZE, CHIEF INVESTMENT STRATEGIST AT POINT VIEW FINANCIAL SERVICES, SUMMIT, NEW JERSEY:
“Clearly the federal tax credit did what it was designed to do. The key question for Wall Street was, did it spur sales that would not otherwise have occurred or just bring them forward from June, July, August, etc.
“There was some slump in the bond market ahead of this data and it continues to show a slight loss for the day, which of course makes perfect sense, the thinking being that the enemy of Treasuries is renewed and vigorous economic activity.
“With the stronger than expected figures in April… that suggests that things are stronger than expected and therefore perhaps Treasury prices didn’t quite reflect the renewed vigor in home sales and that’s putting downward pressure on them.”
TONY CRESCENZI, MARKET STRATEGIST, PORTFOLIO MANAGER, PACIFIC INVESTMENT MANAGEMENT CO, NEWPORT BEACH, CALIFORNIA.
“Mortgage applications are the forward-looking data, and those plummeted. So that’s more in focus than pending homes sales and they’re (mortgage applications are) telling us that the overall housing market is really still moving sideways at moment.
“The market reaction is going to be muted because it’s (pending home sales) B-rated data and the general concern is still more on the European sovereign debt dilemma and its potential impact on economies around the world.
“There’s a debate as how that will play out on the rest of the world; whether it will cause a sudden (economic) stop or if the cyclical tailwinds are enough to pull us through, we just don’t know yet.”
DAN GREENHAUS, CHIEF ECONOMIC STRATEGIST, MILLER TABAK + CO., NEW YORK, NEW YORK:
“As a reminder, pending sales are a measure of contract signings which, in one or two month’s time, become existing home sales. “Also as a reminder, in order to qualify for the first time homebuyer’s credit, a contract needed to have been signed by the end of April with the closing occurring no later than the end of June. As such, a spike in pending home sales in April is not at all surprising. Furthermore, that the peak in sales is below the peak set during the first expiration is not surprising either.
“The flip side is of course what happens following the credit’s expiration. Following the first expiration, activity predictably slowed and we see no reason to believe that this activity will not be repeated. The housing market, despite the improvement, remains challenged by the usual host of macro factors and while each passing day brings us closer to the day when these issues have been sufficiently addressed, that day is not tomorrow or, in our opinion, any time soon.”
STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, BASED IN GREENWICH, CONNECTICUT.
“We have this incentive to do this type of business now and there might have been a rush — the number was a better than expected. The question is if they’re going to extend it (the tax incentive) so that a lot of these people that are pending can close … The big question is do we get some type of resumption in a few months from this data or not.”
TYLER VERNON, PRINCIPAL AND PORTFOLIO MANAGER, BILTMORE CAPITAL ADVISORS, PRINCETON, NEW JERSEY:
“This is mostly being supported by the tax credits that are in place. This number beat expectations and we will probably see at least another one to two months of very good numbers here as people try to close before the June 30th mark to get this tax credit.
“At this point, this and other encouraging economic news is being overshadowed by the European issues.”
MICHAEL MALPEDE, SENIOR ANALYST, EASY FOREX, CHICAGO
“It was slightly higher than expected, and given that it follows relatively positive Challenger numbers, it gives the market two more positive U.S. economic reports. If you look at this from a yield and growth differential perspective, I think it’s positive for the dollar. If it weren’t for the EU debt crisis, I’d be in the camp that says the Fed moves sooner rather than later (on raising interest rates).”
DAVID RESLER, CHIEF U.S. ECONOMIST, NOMURA SECURITIES, NEW YORK:
“It’s partly attributable to the last-minute rush to take advantage of the homebuyer’s tax credit. That probably is part of the reason for the solid gain but also I think the housing market is beginning to turn and we expect we’ll see relatively healthy numbers on this for some time. The next month or two, we might get some payback as the homebuyers who were induced to buy early are no longer in the market.”
“I think in fact if anything (the MBA mortgage applications data) reinforces our view because there has been a fall-off in applications.
“I think the Treasury market’s probably going to follow the lead of the stock market, moving in the opposite direction, and this seems to be buoying up the mood in the stock market so I suspect that it will cause some consternation in bond land.”
CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:
“It shows the rush to beat the deadline for home buyers tax credit which expired in May. It’s a good report, showing a higher-than-expected increase of roughly 6 percent in April and an upward revision from the previous month to 7 percent from 5 percent. This series is impacted by the timing of the homebuyers tax credit which expired in May. There will still be a surge of actual home closings which are counted in existing home sales so existing home sales should do well in the next two reports. New home sales, though, will start to reverse themselves in the next report. Declines of 3 to 6 percent are probably expected for the next new home sales report.”
JESSICA HOVERSON, FIXED INCOME AND CURRENCY ANALYST, MF GLOBAL, CHICAGO:
“It seems like the market is treating it as a non-event. There are other issues out there. We have other data out this week such as non-farm payrolls.”
MARKET REACTION: STOCKS: U.S. stock indexes held gains. BONDS: U.S. Treasury debt prices were steady at lower levels. DOLLAR: U.S. dollar was little changed.