It’s a fairly rare event, but now and then most of the important economic directional signs go positive, and this is one of those weeks.

Let’s start with pending home sales. After a big decline in November, they bounced back on purchase contracts signed in December and now point to an even stronger spring market.

Pending sales gained one percent nationally, 5.2 percent regionally in the Midwest, 2.3 percent in the Northeast, 2.2 percent in the South, but lost 3.8 percent in the West.

Lawrence Yun, chief economist for the National Association of Realtors, which conducts the pending sales survey, said the swings from month to month are “masking the underlying trend (in housing), which is a broad improvement over year-ago levels.”

December’s pending sales contracts were 11 percent higher than December 2008’s.

Yun also predicts that that the two home purchase tax credits — the extended $8,000 credit and the new $6,500 credit — will have a significant impact on closed sales in the coming several months.

He forecasts that the two credits combined will stimulate 2.4 million sales in 2010, and most of that activity will be compressed into the first six months of the year.

The U.S. economy also is showing signs of unexpectedly vigorous growth. The GDP or gross domestic product — that’s the yardstick the government uses to gauge where the economy is headed — grew at a rate of 5.7 percent in the fourth quarter of last year — much faster than the consensus forecast by economists, which was in the four and a half percent range.

Manufacturing, obviously a key employment sector and important for real estate, also is showing signs of a faster rebound. Manufacturing orders were up four percent in January, according to the Institute for Supply Management, and hit the highest point since August of 2004.

Meanwhile, Frank Nothaft, chief economist for financing giant Freddie Mac, says he does not see a “double dip” in economic growth ahead, where the rebound loses steam mid-year after several strong quarters of growth.

In a discussion with Realty Times, Nothaft said that although mortgage rates are likely to rise to the mid or even upper five percent range, he sees a steady expansion of housing activity ahead for the rest of the year.

Mortgage rates last week stayed flat around 5 percent for 30 year fixed loans, and 4.3 percent for 15 year terms. Applications for mortgages to purchase homes took off big time, according to the Mortgage Bankers Association — they rose nearly 18 percent for the week.

By Kenneth R. Harney
February 9, 2010
Realty Times