Sales contracts for previously owned homes increased in February, a sign that buyers might be jumping off the fence to beat the April 30 federal tax-credit deadline.
The National Association of Realtors' pending-sales index, which tracks sales agreements expected to close 45 to 60 days from the signing date, rose 8.2 percent in February from January and was 17.3 percent higher than in February 2009.
For the eight-county Philadelphia area, the pending-sales index compiled by Prudential Fox & Roach's HomExpert Market Report rose 6.85 percent in February from January and was 12.5 percent above the same month in 2009.
In February, 3,630 houses went under contract in the Philadelphia region, the report said, compared with 3,397 in January and 3,226 the same month a year ago.
"The rise in buyer-contract activity may signal the early stages of a second surge of home sales this spring," said Lawrence Yun, chief economist for the Realtors' association. "The healthy gain hints home prices are continuing to flatten."
Although the pending-sales increase was encouraging to the housing industry after three monthly declines, using contract signings to gauge the strength of the market is problematic.
Many experts maintain that government intervention in the housing market has affected the accuracy of the economic models they use to predict completed sales. That has resulted, the experts say, in overestimates of sales in the last three months based on the corresponding pending-sales reports of previous months.
The government's latest intervention effort began Monday, when short sales were added to the tools homeowners can use to avert foreclosure if their mortgages exceed the appraised values of their homes.
This initiative of the Home Affordable Modification Program requires participating lenders to offer short sales in writing to borrowers within 30 days of their either being ruled ineligible for mortgage modification under the program or unable to sustain payments under a trial plan.
The initiative requires the voluntary cooperation of lenders and mortgage servicers participating in the government program.
Sylvia Alayon, vice president of operations for the Consumer Mortgage Audit Center, warned, however, that "short sales by the government will hurt the market long term - a massive real estate inventory will significantly decrease the already depreciated values of homes."
Vast numbers of cut-price foreclosures in the West and Florida were the main contributors to more than three years of declining U.S. home values.
Last year, the first federal tax credit was responsible for more than 2 million home sales, primarily between August and Nov. 30, when the $8,000 incentive for qualified first-time buyers expired.
The second round of incentives, which took effect Dec. 1, offers a maximum $8,000 tax credit for first-time buyers and a maximum $6,500 credit for repeat buyers who have not purchased houses in more than five years.
Eligible buyers must sign sales agreements by April 30, with settlement by June 30.
Until mid-March, fixed mortgage-interest rates remained below 5 percent, which along with the tax credits and declining prices made buying a house more affordable than it has been in a decade.
In the last few weeks, however, interest rates have been rising, reaching 5.23 percent for a 30-year fixed-rate mortgage Monday, according to Bankrate.com.
"It's because of the feeling that the economy is getting better, and that there is a push into buying stock rather than bonds," said Philadelphia mortgage broker Fred Glick. (Interest rates are linked to bond yields.)
"I think [interest rates] will come back when there is another piece of bad economic news and/or the end of this tax-credit cycle," Glick added.