U.S. Housing Data Buoys Growth Outlook

Contracts to buy previously owned U.S. homes rose for a fourth straight month in April to a nine-year high, buoying the outlook for the housing market and the overall economy.  While other data on Thursday showed an unexpected increase in new applications for unemployment benefits, filings remained at levels consistent with a tightening labor market.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, increased 3.4 percent to 112.4, the highest level since May 2006.  Generally contracts become sales after a month or two, and last month’s increase pointed to a pick-up in home resales after they lost momentum in April. Economists had forecast pending home sales rising only 0.9 percent last month.

“Today’s report suggests we may see continued strength in resales in the months ahead. However, the current low inventory levels, which are placing upward pressure on home prices, remain a bit of a downside risk,” said Derek Lindsey, an economist at BNP Paribas in New York.  The jobless claims and housing data joined upbeat reports on consumer confidence and business spending plans that have hinted the economy might finally be gaining steam as some drags on growth in the first quarter either fade or ease.