NWSA News Corporation

The number of homes that in April went under contract to be sold climbed to the highest level in over a decade, a sign the housing market is gaining traction and supported by steady job creation and historically low interest rates.

Pending sales of previously owned homes, reflecting contract signings, rose 5.1% last month from March, the National Association of Realtors said Thursday, handily exceeding the 0.7% rise expected by economists surveyed by The Wall Street Journal.

The sales index climbed to 116.3, the highest level since February 2006. An index of 100 is equal to the average level of contract activity during 2001, which the NAR considers a "normal," or balanced, market for the current U.S. population.

"U.S. housing-market activity continues to improve, and all indications thus far point to a strong spring selling season," said Barclays economist Jesse Hurwitz.

Steady demand for housing has tightened supply and pushed up prices in many markets, especially those where many jobs are being created.

But that doesn't seem to be deterring buyers.

Thursday's figures showed the highest jumps in the West and South, two regions with swiftly appreciating home prices. The Midwest showed a slight slowdown, despite being the most affordable region. That could be a reflection of a slight cooling off as existing-home sales in the Midwest rose sharply in April. Nationwide, April existing-home sales rose for the second straight month, the NAR said Friday, leaving 4.7 months' supply of existing homes on the market.

Some economists are concerned that scarce inventory could cap further improvement in the market.

Housing-industry watchers are looking to builders to add more houses to the market. But inventory of new homes for sale sank at the end of April to 4.7 months' supply, its lowest level in more than a year, the Commerce Department said Tuesday.

"Housing appears to have had a really good early spring market but this could be due to the fact that the winter was mild and spring set in early," said Steven Ricchiuto, chief economist at Mizuho Securities USA. "I expect this will prove to be a short-lived development."

Pending sales in April rose 4.6% compared with a year earlier, marking the 20th consecutive month of year-over-year gains. Pending sales provide a more up-to-date assessment of the housing market than other measures because they are based on contract signings, the earliest stage of the sales process. It can take weeks and even months for sales to become final, or to "close." Contracts can be canceled for a variety of reasons.

Pantheon Macroeconomics chief economist Ian Shepherdson called April's pending home sales "spectacular" but said he expects "no further significant gains in the next few months" based on patterns in mortgage applications and seasonal issues that potentially overstate April's pending sales figure.

New-home sales picked up in April, the Commerce Department said Tuesday. But the tightening in the new-construction market has pushed up prices 9.7% from a year earlier: April's median sales price of $321,100 was the highest price on record.

It is unclear whether potential home buyers can keep up with such rapid price gains, since wages haven't been rising at nearly that pace. Soaring prices may shift buying appetites to more affordable regions, such as the Midwest.

News Corp., owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.

Write to Anna Louie Sussman at anna.sussman@wsj.com

(END) Dow Jones Newswires

May 26, 2016 13:25 ET (17:25 GMT)

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