Government's 'March Madness' Could Lift Housing Figures

Pending home sales figures for February were dismal, but that was before the government’s historic March intervention to rescue a faltering U.S. economy.

“There’s nothing much to write home about here in terms of good news. There‘s no evidence in these figures that the market has turned a corner,” said Mike Larson, a real estate analyst with Weiss Research.

The National Association of Realtors’ Pending Home Sales Index, which represents the number of homes under contract, fell 1.9% to 84.6 in February, down from 86.2 in January.

Even worse, the figure was down 21.4% from a year ago.

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But that was before the government stepped in in a big way in March. Specifically, the Federal Reserve brokered a deal that allowed JPMorgan Chase (JPM) to buy ailing investment bank Bear Stearns (BSC), a move intended to instill confidence in a shaky banking sector.

Two days later, the Fed cut interest rates by another 75 basis point, making borrowing cheaper.

Meanwhile, programs intended to help homeowners facing foreclosure were expanded so that more-- and larger -- loans could be refinanced at terms that make loans easier to repay.

Larson believes the Fed’s “aggressive steps” could help revive the flagging U.S. housing market--at least temporarily.

“I wouldn’t be surprised if the numbers were better in March and into April,” he said. “The question is whether we can sustain that.”

Larson said the number of existing homes for sale appears to be leveling off, a reversal of a negative trend that had seen inventories rising even though prices were falling.

“Prices were falling and no one cared, but now people might be getting interested,” Larson suggested.

NAR chief economist Lawrence Yun, echoing analysts’ comments, said the data has both positive and negative implications.

“The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” he said in a release.

The NAR numbers reflect the regional nature of the housing downturn. In the Northeast, the number of homes under contract rose 3.2% to 71.8. But that’s a drop of  25.4% from this time last year. In the Midwest, pending sales fell to 82.7, a 3.7% drop from January and a 17.4% decline from February 2007.

In the South, one of the hardest hit areas of the U.S., the February index fell to 85.0, a 5.5% drop from January and 30.3% drop from 2007. The West, also hard hit, saw a 9.8% drop to 84.6 in pending home sales since January and a 17.1% decrease from February 2007.

The index is based on the pending sale of homes, or homes under contract, but the sale is not expected to be final for one to two months.

Debi Averett, an Austin-based housing expert who runs a Web site called HousingDoom.com, noted that lousy pending sales figures usually bode badly for future sales.

“When you’re looking at miserably low pending numbers, you’re looking at miserably low sales the next month because all of these deals aren’t going to close,” she said.

The housing bubble took several years to inflate and will likely take just as long to deflate, she said.

“There’s light at the end of the tunnel, but it’s a long tunnel,” Averett said.