UPDATE 2-US pending home sales bodes well for spring buying

(Repeats with no change to headline or text)

* Pending home sales index up 2.1 percent in February

* First gain for index in two months

* Sets up positive start to spring buying season

(Adds details, quote, market reaction)

By Leah Schnurr

WASHINGTON/NEW YORK, March 28 (Reuters) - Surprisingly
upbeat data on the U.S. housing market on Monday suggests home
sales will tick higher going into the traditionally strong
spring season.

Pending sales of previously owned U.S. homes unexpectedly
rose in February, a welcome sign after data last week showed
sales of new and previously owned homes slumped last month. For
details, see [ID:nN23141447]

The data leads existing home sales by a month or two and
suggests some of the recent weakness was due to unusually
severe winter weather. Nonetheless, housing remains at low
levels and economists expect that will continue.

The National Association of Realtors said its Pending Home
Sales Index, based on contracts signed in February, increased
2.1 percent to 90.8 after declining for the past two months.

Economists had expected the index to fall 1.0 percent after
a previously reported 2.8 percent decline. Compared to February
last year, the index was down 8.2 percent.

"What this tells me is the housing market is still groping
for stabilization, but certainly it made some progress in this
month," said Anthony Chan, chief economist at J.P. Morgan
Private Wealth Management in New York.

"This figure would suggest as you are starting to approach
the peak season that the market is getting off to a favorable
start."

Ian Shepherdson, chief U.S. economist at High Frequency
Economics, estimated that the increase in pending sales
suggests existing home sales for March will rise to an annual
rate of about 5 million units from February's 4.88 million unit
pace. Sales of previously owned homes have declined 9.6 percent
in February.

An oversupply of homes exacerbated by an increasing flood
of properties falling into foreclosure is frustrating recovery
in the housing market, whose collapse triggered the worst U.S.
recession since the 1930s.

The housing market has remained outside the broader
economy's expansion. Though residential construction accounts
for about 2.3 percent of gross domestic product, housing has a
big impact on the economy as changes in house prices can affect
consumer confidence.

New home sales plumbed record lows in February and housing
starts recorded their biggest decline in 27 years.

The recent dismal data had raised questions of whether a
double-dip was taking place in the housing market. Economists
said that it was more likely the sector will remain weak for
some time.

"We may not see notable gains in existing home sales in the
near term, but they're expected to rise 5 to 10 percent this
year with the economic recovery, job creation and excellent
affordability conditions providing confidence to buyers who
have been on the sidelines," said NAR Chief Economist Lawrence
Yun.

The spring season is traditionally a strong one for home
buying as purchasers look to have their families moved in
before the school year starts in September.

Leif Thomsen, chief executive of Mortgage Master, said the
Walpole, Massachusetts-based lender has seen a strong increase
in March mortgage applications compared to the first two months
of the year, bringing them more in line with their monthly
average last year.

"Especially in the northeast because of the winter we had,
there was an almost complete standstill in the purchase
business. We're seeing a little bit of a surge now, maybe a
little bit of pent-up demand from the last couple months," said
Thomsen.

Even so, Thomsen and others in the industry say potential
home buyers are not in a rush to buy.

"The homes they looked at twelve months ago are still for
sale and maybe it's been dropped in price, so why would they be
in a hurry?" said Thomsen.

(Additional reporting by Lucia Mutikani; Editing by Andrew
Hay)