Pending Home Sales Reading Strong Thanks to Tax Credit

The National Association of Realtors anticipates a surge in home sales during the second quarter as buyers rushed to sign sales contracts in March to take advantage of expiring federal tax credits. Tuesday morning NAR reported that its index of pending home sales -- which is based on contract signings -- rose 5.3% in March after rising 8.3% in February. The index serves as a leading indicator of home sales over the next month or two. The tax credit officially expired April 30, but buyers have until June 30 to close and still qualify for two different tax credits -- one for $8,000 and another for $6,000. (In California, a state tax credit for $10,000 is still available but only for buyers of newly constructed homes.) NAR economists believe existing home sales will jump more than 10% from the first to second quarter to a seasonally adjusted annual rate of 5.68 million before falling back to 5.17 million in the third quarter. "Later in the second half of the year and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home prices stabilizing," said NAR chief economist Lawrence Yun.