Pending sales of U.S. existing homes rose 10.4% in October

Posted 12/1/11

WASHINGTON - The number of Americans signing contracts to buy previously owned homes rose more than forecast in October as buyers took advantage of falling prices and low borrowing costs.

The index of pending home sales increased 10.4 percent, the biggest gain since November 2010, after falling 4.6 percent the prior month, figures from the National Association of Realtors showed Thursday in Washington. Economists forecast a 2.0 percent increase, according to the median estimate in a Bloomberg News survey.

While mortgage rates near record lows are helping some buyers purchase housing that’s growing more affordable as prices drop, 9 percent joblessness and tight lending standards are keeping others out of the market. A new wave of foreclosures may augment the property oversupply, triggering further slides in value and delaying an industry recovery.

“Any improvement in sales and building activity in the housing market is welcome,” Ellen Zentner, senior U.S. economist at Nomura Securities International Inc. in New York, said before the report. “While there has been no impetus for a renewed downturn in housing, there’s been no impetus as of yet for a turn upward.”

Bloomberg Survey

Estimates for pending home sales ranged from a drop of 2 percent to an increase of 5.6 percent, according to the median of 37 forecasts in the Bloomberg survey.

Pending home sales were up 7.3 percent from October 2010.

Three of four regions showed an increase in contract signings from a month earlier, led by the Midwest. Only the West showed a decrease, with a 0.3 percent decline.

“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows,” NAR chief economist Lawrence Yun said in a statement accompanying the release. “There is a pent-up demand from buyers who normally would have entered the market in recent years.”

Today’s report showed an index level for pending home sales of 93.3 on a seasonally adjusted basis. A reading of 100 is consistent with the average level of contract activity in 2001 and coincides with “historically healthy” home-buying traffic, according to the NAR.

Because they track contract signings, pending home sales are considered a leading indicator. Existing homes sales are tabulated when a contract closes, typically a month or two later.

Attracting Buyers

A report from the NAR last week showed sales of previously owned homes unexpectedly rose in October, suggesting that falling prices may be attracting buyers. Purchases increased 1.4 percent to a 4.97 million annual rate. The median price fell 4.7 percent from a year earlier.

As cheaper properties may make purchasing a home more appealing to some, the threat of continued declines could keep potential buyers waiting until they believe the market has bottomed.

A temporary halt on foreclosures stemming from faulty seizures that is coming to an end threatens to unleash more seized properties, further weighing on prices. In the third quarter, U.S. lenders started foreclosures on more homes, the first increase in a year.

“We’re in a market that’s quite fragile,” Ara Hovnanian, chairman and CEO of Hovnanian Enterprises Inc., said during a Nov. 9 investor conference. “While delinquency rates have taken a little dip, on the whole, there is nothing that says that foreclosures are going to change dramatically over the near term, however you define that.”

The S&P/Case-Shiller index of home values in 20 cities slid 3.6 percent in September, capping 12 straight months of declines, the group said yesterday. Nationally, prices decreased 3.9 percent in the third quarter from the same time in 2010.

PBN Hosted

Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
  • Best Places to Work
    Enrollment is now open for the 7th annual Best Places to Work program. Winners w ...
  • Manufacturing Awards
    Applications are now being accepted for the 2nd Annual Manufacturing Awards. Dea ...
Purchase Data
Book of Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  • Purchase an e-File of the entire Book of Lists database
  • Purchase a printed copy of the Book of Lists
    Latest News