Housing Market May Recover Avoiding Recession As NAR's Index Rises

New York, NY (AHN) - The housing market may not be driving the U.S. economy in to the recession, after all.

The number of homes under contract to be sold surged unexpectedly in the month of June, according to a report released Thursday.

The National Association of Realtors reported on Thursday that pending U.S. homes sales rose by 5.3 percent in June, more than the prior month that was revised downwardly to 4.9 percent.

The report showed that its seasonally adjusted index of pending sales for existing homes increased to 89, compared to the reading of 84.5 in the month of May.

The market analysts had expected the NAR's Pending Home Sales Index to dropped to 84.3 in the month of June.

Some market analysts speculated that bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price drops.

"Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices," Lawrence Yun, chief economist for the NAR, said in a statement.

"In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas."

The NAR's index, which was down to a record low of 83 in March this year, was at 101.4 in June 2007.

The pending home sales index, which is considered to be a leading indicator of existing home sales, increased in all the four regions of the country.

In the Northeast in the month of June the index was up by 3.4 percent. The index increased by 1.3 percent in the Midwest, 4.6 percent in the West and 9.3 percent in the South of the U.S.

Despite the monthly gains, all four regions remain below year-ago levels, as the June index was 12 percent down.

Meanwhile, some market analysts are expecting the last month's housing bill to help the sales recover from the slumping market condition in the following months.

The U.S. Senate voted 72 to 13 in favor of the bill that offers up to $300 billion in loan guarantees for homeowners to get cheaper loans.

The new law will also be used to rescue the beleaguered firms, Fannie Mae and Freddie Mac, which have found difficult to raise fresh capital enough to shore up its weakened balance sheet.

The housing legislation, which is the second major step by the Bush administration after economy stimulus package in tax rebates, is aimed to help hundreds of thousands of families from losing their homes to foreclosure.

The new law signed by President Bush last week include a $7,500 tax credit for first-time homebuyers, which is likely to improve the housing market.