By Alan Zibel
AP Real Estate Writer
Washington (AP) — The number of buyers who signed contracts to purchase homes surged more than expected in March, another sign that government incentives are propelling the housing market this spring.
According to a National Association of Realtors’ report on Tuesday, the association’s seasonally adjusted index of sales agreements for previously occupied homes rose 5.3 percent from a month earlier to a reading of 102.9.
The federal government has provided a big boost to home sales this spring by offering first-time buyers a tax credit of 10 percent of the purchase price, up to $8,000. There is also a credit of 10 percent, up to a maximum of $6,500, for homeowners who buy and move.
These incentives have stimulated home sales, but the deadline to get a signed sales contract was April 30. Many analysts project sales will drop sharply in the second half of the year.
“Strength in the spring was all but certain,” according to a statement attributed to Dan Greenhaus, chief economic strategist at Miller Tabak. “A slump following the credit’s expiration is likely although the exact timing is difficult to predict.”
Some analysts expect prices to slump as well, especially if mortgage rates rise and more foreclosed homes hit the market.
Nevertheless, economists and real estate agents alike want the economy to be strong enough to bring down the unemployment rate from the current 9.7 percent. If that happens, it “could be enough to stabilize the housing market,” according to a statement attributed to Jennifer Lee, an economist with BMO Capital Markets.
March’s reading for pending home sales was the highest level since October and a 21 percent increase from the same month a year earlier. February’s reading was revised upward slightly to 97.7. Economists surveyed by Thomson Reuters had expected the index would rise 4 percent to 101.5.
The index provides an early measurement of sales activity because there is usually a one- to two-month lag between a sales contract and a completed deal.
Pending sales surged by 13 percent in the South, 2 percent in the West and 1 percent in the Midwest. They fell 3.3 percent in the Northeast.
R.J. Wroten, 34, who works at a concrete company east of San Francisco, made offers on around 30 homes over the past year. He finally signed a contract last Friday, the last day for buyers to qualify for the tax credit.
For Wroten, diligence paid off. He was up until midnight April 27 with his agent, Dalisa Porche of Coldwell Banker in Berkeley, Calif., getting together offers on five homes.
One of those — an offer to pay $160,000 for a foreclosed property in Oakland — was accepted. He’s taking out an extra $20,000 in loans to pay for fix-up work.
“It was very gratifying,” Wroten said. With the deal now in the works, he said, “I don’t have to take up my weekends to go look at places.”