WASHINGTON -- Americans signed more contracts to buy previously occupied homes in May, matching the fastest pace in two years. The increase suggests consumers are gaining confidence in the housing market, and a modest recovery will continue.
The National Association of Realtors said Wednesday that its index of sales agreements increased to 101.1 last month from 95.5 in April. That matches March's reading, the highest since April, 2010, when a home-buying tax credit boosted sales.
A reading of 100 is considered healthy. The index is 13.3 percent higher than it was a year ago. It bottomed at 75.88 in June, 2010, after the tax credit expired. Analysts had expected a far smaller bounce in May.
In Ohio, the number of single-family homes and condominiums put under agreement in May rose for the 13th consecutive month compared to the same month a year earlier, according to the Ohio Association of Realtors.
"With each passing month, it's becoming increasingly evident that Ohio's housing marketplace is making significant strides in its attempt to recover from the downturn that decimated our nation's economy four-plus years ago," said OAR President Robert Miller.
Ohio's May Pending Home Sales Index of 121.2, a forward-looking indicator based on contract signings, rose 2 percent from the April index of 118.6 and 19 percent from the May, 2011, index of 101.8. An index of 100 is equal to the average level of contract activity during 2008.
The improvement in the national figures supports other data showing steady improvement in the housing market this year, even as hiring slumps and consumer confidence sags.
Sales of new and previously occupied homes are up over the last 12 months. Builders are starting more projects. And prices are rising in most markets.
"Despite the gloom in much of the recent economic data, housing continues to show real signs of life," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The economy benefits when home sales rise. Buyers typically spend more on renovations, furniture, appliances, and landscaping. Also, in good times, most homes rise in value. When homes appreciate, people feel they have more money, so they spend more. Consumer spending drives roughly 70 percent of economic activity.
It typically takes one to two months to close on a home after signing a contract. So the increase in signed contracts suggests completed home sales will rise this summer.