Contracts to buy U.S. previously owned homes increased for a third straight month in February, raising cautious optimism that the housing market slump could be bottoming out.
The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, rose 0.8% last month to the highest level since August.
Economists polled by Reuters had forecast contracts, which become sales after a month or two, would fall 2.3%. The surprise increase occurred despite a rise in mortgage rates from early February through early March, according to data from mortgage finance agency Freddie Mac. Before the recent rise, mortgage rates had mostly been on the decline since November.
Contracts jumped 6.5% in the Northeast. They also edged higher in the Midwest and South, but dropped 2.4% in the West.
Pending home sales decreased 21.1% in February on a year-on-year basis. Data this month showed sales of previously owned homes rebounded for the first time in a year in February, while new home sales notched their third straight monthly increase.
Homebuilder sentiment is recovering, though it remains at depressed levels. Single-family housing starts and building permits also rose in February.
"After nearly a year, the housing sector's contraction is coming to an end," NAR Chief Economist Lawrence Yun said in a statement.
The housing market has been squeezed by the aggressive interest rate hikes delivered by the Federal Reserve in its battle to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
Mortgage rates increased from early February through early March before trending lower as the collapse of two U.S. regional banks sparked fears of contagion in the banking sector, pushing down U.S. Treasury yields.
The Fed last week raised its benchmark overnight interest rate by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs in a nod to the financial market turmoil. The U.S. central bank has hiked its policy rate by 475 basis points since last March from the near-zero level to the current 4.75%-5.00% range.
The housing market outlook is uncertain because the financial market stress has caused banks to tighten lending standards, which could make it harder for prospective homebuyers to borrow.
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