Pending Home Sales Rise

Stronger than expected pending home sales are attributed to historically low mortgage rates and expiring federal tax credits pushing more buyers into the housing market during April, according to the National Association of Realtors' gauge of future home sales. NAR reported that its index of pending home sales, which is based on contract signings, rose 6% in April after rising 6.6% in March. Those signings should translate into mortgage closings in May and June. Also, NAR economists expect a surge in existing home sales to a seasonally adjusted annual rate of 5.69 million in the second quarter, up 11% from the prior quarter. The homebuyer tax credit expired on April 30, but applicants have until June 30 to close and still qualify for the tax credit. NAR is warning that two months may not be enough time for some homebuyers to reach the settlement table and is asking Congress for flexibility on the June 30 deadline for closing. In a research note, Barclays Capital cited the tax credits for the strong reading, but also said "underlying demand, coupled with the warmer weather in the spring season" played a role. Meanwhile, the Greek debt crisis has pushed yield on the 10-year Treasury down, and along with it U.S. mortgage rates. For the week ending May 28, 30-year FRMs were being offered at 4.8% to applicants with good credit. NAR economists lowered their forecast for mortgage rates in the fourth quarter to 5.4%—down from 5.6% in their forecast of just a month ago. NAR does not expect mortgage rates to rise above 6% in 2011.