Spring home sales could be omen

Some regions expected to see strong activity

The spring home-selling season could be the strongest in years and may foreshadow which markets will lead a battered housing industry in an anemic recovery, economists say.

“This spring will be the litmus test for housing demand,” says Steven Ricchiuto, chief economist for Mizuho Securities USA.

The spring season typically runs March through June but may have started early this year because of unseasonably warm weather.

While last year was dismal for existing home sales, this year is looking better. Existing home sales in February were up 9% from the same time a year ago, as was the Pending Home Sale index, which reflects signed contracts leading to sales, says the National Association of Realtors.

Meanwhile, Realtors’ confidence in the single-family home market is the highest in four years, according to a late February NAR survey of 4,300 agents. Coldwell Banker says its website’s traffic was up 47% in February from last year.

This spring season “will be the best in four or five years,” says economist Paul Dales of Capital Economics.

But not all markets will move together, and spring sales may signal which ones are improving or still declining, says Eric Fox, Veros Real Estate Solutions economist.

Veros forecasts that U.S. home prices overall will drop 0.85% in the next 11 months but that 40% of 321 metropolitan areas will see prices rise.

Phoenix will do best, Veros says. Given a 42% drop in home supply and a relatively strong economy, Phoenix homes will see a 5% price gain this year, Veros says.

A similar-size drop in supply is also helping Denver, says Scott Webber, president of Fuller Sotheby’s International Realty. “We’ve returned to a much more balanced market,” he says.

Denver prices rose 0.2% in January year-over-year, the Standard & Poor’s Case-shiller index shows. Of 20 cities, only Denver, Phoenix and Detroit posted annual gains, S&P says.

Webber says non-distressed homeowners still hesitate to sell, but others see a shift. In central Pennsylvania, Coldwell Banker saw a 30% jump in new listings in February over a year ago. March was strong, too, says manager Naomi Fredlund in Hershey.

“People were holding off,” hoping for stronger prices, Fredlund says. “Now, they’re selling.” She expects flat prices.

Spring sales could disappoint because a mild winter drew some buyers into the market earlier, Dales says. Also, investors bought a record 25.4% of homes in February, says a Campbell/inside Mortgage Finance survey. They buy all year and may mute the impact of the spring season this year.