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Financial Planning > Tax Planning

Pending Home Sales Surge; Factory Orders Jump

By Ron Pechtimaldjian

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Home buyers, fueled by the deadline for a government tax credit, pushed up pending home sales in March to its highest level since October, and factory orders in March unexpectedly jumped.

The Pending Home Sales Index (PHSI), released Tuesday, May 4, by the National Association of Realtors (NAR), rose 5.3% to 102.9, from 97.7 in February, and is 21.1% above March 2009 when it was 85.0; this follows an 8.3% increase in February. The index in October was 112.4 when the expiring government tax credit energized home buyers. Last year the government extended the credit to April 30.

Separately, the Commerce Department said Tuesday new orders for manufactured goods rose 1.3% in March, after an upwardly revised 1.3% gain in February. Economists polled by Thomson Reuters forecast a decline of 0.1% in March.

Some of March’s rebound in orders was expected as businesses resupplied after a long period of exceptionally low levels. But when excluding transportation orders, the numbers were particularly robust, surging 3.1%, the biggest gain in almost five years, Commerce Department data showed.

In the housing market, Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit.

“Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” Yun said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

A PHSI reading of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Read the breakdown of the numbers in the NAR’s PHSI.

Read the full version of the Commerce Department’s report on factory orders.

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