Pending Home Sales Improve But It's Still a Buyer's Market

Pending sales of previously-owned homes rose more than expected in March as consumers rushed to take advantage of the homebuyer's tax credit, which expired at the end of April. The home sales index from the National Association of Realtors increased 5.3 percent in March after rising 8.3 percent in February. How sustainable is this rebound, though? Diane Swonk tells us.
-Nelson Wang
Continued Upside Expected
The increase in pending home sales is expected and a relief. It means there is still some impact to be felt from the home buyer tax credits that expired April 30. Moreover, the upside should last longer than it did after the expiration of the first-time buyer tax credit in November, as this tax credit covers homes under contract, but not necessarily closed by, the end of April. So the "sales" from this tax credit will persist into May and June.

Job Growth Still Weak The key to the sustainability and strength of the housing market recovery, however, ultimately depends upon income growth and job generation. The good news is that raises and bonuses are being reinstated, which should provide support for buyers on the fringe on affordability. The bad news is the job generation is expected to remain extremely subdued, which will dampen the strength of the recovery in housing once the tax credits work their way through the market.

Still a Buyer's Market
Housing prices are expected to stabilize but not appreciate much in the second half of the year as every time prices firm, all those who have been waiting to list their homes will do so. The bottom line is that the market for housing is expected to remain a buyer's market for some time to come, despite some glimmers of light in the market.

Diane Swonk, chief economist at Mesirow Financial, talks to CBS MoneyWatch twice a week about the day's top economic news and developments. Her responses are edited for clarity and length.