Foreclosure sales may be driving U.S. housing sector

Michael Babad of CTV

What's driving U.S. home sales?
Analysts were impressed yesterday when the latest reading on the U.S. real estate sector showed pending home sales, or signed sales contracts, climbed 4.3 per cent in August to its best showing since April. U.S. housing was the epicentre of the meltdown, and while coming back the outlook is still for weak growth.
Chief economist David Rosenberg of Gluskin Sheff + Associates parsed the numbers, and asks today if sales sparked by record foreclosures are driving the increase.
"What caught our eye was the huge 24-per-cent jump in sales in the West - taking pending home sales back to October 2009 levels," Mr. Rosenberg said in a research note. "We also noticed a large 14--per-cent monthly jump (on a seasonally adjusted basis) in resale sales in the West, when the data were released a few weeks ago. It seems that attractively priced foreclosure sales could be driving the recent gains in existing/pending home sales. While encouraging, we don't believe fundamentals are driving the recent gains in home sales and once the flurry of foreclosure sales dies down, we could be in for much weaker numbers."