US pending home sales index jumps in April

Contract activity in the US homebuilding sector reached its highest level in more than a decade in April, according to the results of a widely-followed survey of conditions in the sector.

The National Association of Realtors´ pending home sales index jumped by 5.1% month-on-month, with all the main geographical regions clocking in with faster activity save for a "meagre" decline seen in the Midwest, the business lobby said in a statement.

April´s surge left the index standing 4.6% above its level of one year ago.

Lawrence Yun, NAR´s chief economist, ascribed contract activity at its highest level since February 2006 to the large increases seen in the South and West, where pending home sales rose by 6.8% and 11.4% in comparison to March, respectively.

"The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets," Yun said.

"The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market."

Yun forecast mortgage rates would remain around 4% over the coming months, but said the potential existed for an inflation surprise that might trigger a sudden increase.

On the back of Thursday´s data, NAR also said the rate of home sales for all of 2016 would exceed its previous estimate for 5.41m units.

"The index is consistent with existing home sales rising to about 5.75M, up from 5.45M in March. That might be asking a bit much, because the seasonals for completed sales are less favorable than the pending numbers, but at least some increase seems a good bet. Looking ahead, the pending sales index is now almost in line with the mortgage applications data, so we expect no further significant gains in the next few months," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.