NEW YORK Pending home sales unexpectedly rose in April to the highest reading since October, an industry group said Monday, but experts say the large proportion of distressed property sales will continue to weigh down prices.
The National Association of Realtors' seasonally adjusted index of pending sales for existing homes rose to 88.2 from a March reading of 83.0, the lowest since the index was started in 2001. However, it's still 13 percent below April 2007's reading of 101.5.
Wall Street economists polled by Thomson/IFR had predicted the index would remain steady at 83.
A reading of 100 is equal to the average level of sales activity in 2001.
However, Global Insight economist Patrick Newport tempered his enthusiasm for the surprising increase in April's pending sales.
"It's good news, but I'm not jumping for joy because I'm not convinced that it's telling us things are picking up," he said. "It's telling me that banks are dumping properties at fire-sale prices, spurring home sales."
Newport noted that inventory remains at record highs and is growing, especially in the West, where foreclosures and so-called short sales make up the bulk of deals. A short sale is where the house is sold for less than the amount owed on the mortgage.
Pending sales there climbed 8.3 percent from March and are 4 percent higher than a year ago.
The NAR expects existing home sales to total 5.40 million this year and then increase to 5.74 million in 2009. The median price is expected to drop 8.4 percent in the first half of the year before stabilizing.