| 3.1°C Dublin

US secondhand home sales hit 2006 level


Contracts to buy previously owned US homes rose to their highest level in just over nine years in May, in a further boost to the housing market and the broader economic outlook.

The National Association of Realtors said yesterday that its Pending Home Sales Index, which is based on contracts signed last month, increased 0.9pc to 112.6, the highest level since April 2006. Contracts have now increased for five straight months, the association said.

Pending home contracts become sales after a month or two, and last month's increase pointed to further gains in home resales after they hit a five and a half year high in May.

Economists had forecast pending home sales rising 1.2pc last month. "The recent trend suggests that we will see continued strength in resales in the months ahead," said Derek Lindsey, an analyst at BNP Paribas in New York.

"However the current low inventory levels, which are placing upward pressure on home prices, remain a downside risk," Mr Lindsey added.

The housing market recovery is back on track after being slammed by bad weather at the start of the year.

It is being bolstered by a tightening labour market, which is helping to spur some pick-up in wage growth.

US financial markets were little moved by the report, with investors warily watching developments in Greece as Athens moved closer to a defaulting on its debt.

US stocks fell at the open, while the dollar was little changed against a basket of currencies. Prices for US government debt were higher.

The pending home sales report added to robust building permits, housing starts, new home sales and home resales data in painting a bullish picture of the housing market.

It also joined strong retail sales, consumer sentiment and employment data in suggesting a building up of momentum in the economy after a mild contraction in output in the first quarter. Pending home sales increased 10.4pc from a year ago.

Contracts increased 6.3pc in the Northeast of the country and rose 2.2pc in the West. They slipped 0.8pc in the South and dipped 0.6pc in the Midwest.

Meanwhile in the UK, mortgage approvals unexpectedly fell in May following a surge in April to their highest level in more than a year.

Approvals dropped to 64,434 from a downwardly revised 67,580, the Bank of England said yesterday. Economists had forecast a figure of 68,800, according to a Bloomberg survey.

Recent surveys suggest record-low borrowing costs and improving household finances are reasserting themselves in the housing market. (Additional reporting Bloomberg)

Irish Independent