Pending Home Sales Rise 2% in December

WASHINGTON ( TheStreet) -- Pending home sales rose 2% in December, according to a National Association of Realtors report released Thursday morning.

An index that measures the number of contracts to buy previously owned homes in the U.S. rose 2% in December month-over-month, but the figure remained 4.2% below year-earlier levels.


Economists had expected the figure to rise 1% after pending home sales rebounded 3.5% in November, following a 10.4% jump in October. November's pending home sales remained 20.5% lower than in the year-earlier month.

Pending home sales are viewed as an indicator of future home sales since they reflect contracts -- not closings -- and generally occur with a lag time of one to two months.

The NAR report followed word from the group last week showing that existing-home sales rose 12.3% in December to a seasonally adjusted annual rate of 5.28 million units, topping Wall Street's expectations. While the rate improved, it remained 2.9% below the 5.44 million units recorded in December 2009.

"December was a good finish to 2010, when sales fluctuate more than normal," said Lawrence Yun, NAR chief economist. "The December pace is near the volume we're expecting for 2011, so the market is getting much closer to an adequate, sustainable level."

On Wednesday the Commerce Department reported that new-home sales spiked 17.5% in December, a far bigger jump than expected though the figure remained 7.6% below year-earlier levels.

The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.

The SPDR S&P Homebuilders ( XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction ( ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.

Among individual builders, Toll Brothers ( TOL) rose 1.5% in morning trading Thuresday. Toll Brothers surprised investors with a return to year-over-year profitability in its fiscal fourth quarter, and recently said deposits jumped 10% in the second half of November compared with year-earlier results.

Lennar ( LEN) gained 0.5%. Earlier this month, Lennar posted better-than-expected fiscal-fourth quarter earnings but said new-home deliveries were down 12%.

Small-cap builder KB Home ( KBH) jumped 1.3% Thursday morning. KB Home recently posted a surprise quarterly profit and said fewer homes delivered in its recent quarter was partially offset by an increase in the average selling price.

Elsewhere, D.R. Horton ( DHI) fell 0.9% and PulteGroup ( PHM) rose 0.2%.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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