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June 30, 2014 8:40 AM, EDT
Pending Sales of Existing Homes Rise Most in Four Years
Patrick Fallon/Bloomberg News

The number of contracts to purchase previously owned U.S. homes jumped in May by the most in more than four years, a sign the residential-real estate market is rebounding after a slow start to the year.

The pending home sales index climbed 6.1%, the biggest advance since April 2010, after a revised 0.5% increase in April, the National Association of Realtors said today in Washington. The gain exceeded the most optimistic estimate in a Bloomberg News survey of economists, whose median forecast called for a 1.5% gain.

Housing demand is benefiting from cheaper borrowing costs, a stronger employment outlook and easier access to credit for some households. At the same time, higher prices and limited income gains are keeping the improvement in the residential real estate from becoming more broad-based.

“Housing is beginning to bounce back,” Paul Ashworth, chief U.S. economist at Capital Economics said. “Mortgage rates have backed down a bit recently. Home prices are still rising, which means fewer people have mortgages that are under water. The longer the housing recovery goes on, the more people will gain confidence to join in.”

The gain in May was the biggest since first-time buyers rushed to sign contracts before the expiration of a tax credit four years ago. Estimates in the Bloomberg News survey of 37 economists ranged from a decline of 0.5% to an advance of 4% after a previously reported 0.4% April gain.

Purchases fell 6.9% from the year prior, on an unadjusted basis, after a 9.3% decrease in the 12 months that ended in April, the association reported.

Pending home sales climbed in all four regions, led by an 8.8% gain in the Northeast. Contract signings increased 7.6% in West, 6.3% in the Midwest and 4.4% in the South.