By Lucia Mutikani
WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes jumped to a 10-month high in February, pointing to robust demand for housing ahead of the busy spring selling season.
The report on Wednesday from the National Association of Realtors suggested little impact on the housing market from higher home prices and mortgage rates, underscoring the economy's resilience despite an apparent slowdown in growth in the first quarter.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, surged 5.5 percent to 112.3. That was the highest reading since April and the second best showing since May 2006.
"The stock market's continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year," said Lawrence Yun, NAR chief economist.
Contract signing last month was likely boosted by unseasonably warm temperatures. The gains reversed January's 2.8 percent drop. Pending home contracts become sales after a month or two, and last month's surge implied a pickup in home resales after they tumbled 3.7 percent in February.
Economists had forecast pending home sales rising 2.4 percent last month. Pending home sales increased 2.6 percent from a year ago.
U.S. financial markets were little moved by the data as investors awaited comments from a host of Federal Reserve officials for clues on the number of interest rate hikes this year. The Fed raised its benchmark overnight interest rate by a quarter percentage point earlier this month.
The U.S. central bank has forecast two more rate hikes this year. The PHLX housing index rose 0.2 percent, outperforming a broadly weaker U.S. stock market. The dollar was trading higher against a basket of currencies. Prices for U.S. government bonds rose.
SPRING BOOST
Last month's jump in signed contracts bodes well for spring, the busiest season for the housing market.
The NAR expects sales of previously owned homes to increase 2.3 percent this year to around 5.57 million units. Existing homes sales increased 3.8 percent last year. Housing market strength suggests an apparent sharp slowdown in economic growth early in the first quarter is likely temporary.
The Atlanta Fed is forecasting gross domestic product increasing at a 1.0 percent annualized pace in the first quarter. The economy grew at a 1.9 percent rate in the final three months of 2016.
Demand for housing is being driven by a strong labor market, which is generating wage increases, as it nears full employment. Sales activity, however, remains constrained by tight inventories, which are driving up home prices.
A report on Tuesday showed home prices increased 5.7 percent in January on a year-on-year basis.
Given labor market strength, economists expect only a modest impact from higher mortgage rates. The 30-year fixed mortgage rate is currently at 4.23 percent, below a more than 2-1/2-year high of 4.32 percent hit in December.
In a separate report on Wednesday, the Mortgage Bankers Association said applications for home purchase loans increased 1.2 percent last week from the prior week.
Last month, pending sales for existing homes increased 3.4 percent in the Northeast and jumped 3.1 percent in the West. Contracts surged 11.4 percent in the Midwest and rose 4.3 percent in the South.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)
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