WASHINGTON – Contracts to purchase previously owned U.S. homes rose less than forecast in November, indicating higher borrowing costs are holding back the recovery in residential real estate.
A gauge of pending home sales increased 0.2 percent, the first gain in six months, after a 1.2 percent drop in October that was larger than initially reported, the National Association of Realtors said Monday in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent advance.
Higher mortgage rates, tight lending standards and price increases driven by a limited supply of homes for sale are discouraging prospective buyers. Further gains in hiring, household wealth and consumer confidence would help boost the housing recovery and give greater momentum to the economy.
“The combination of bank reluctance to lend and the pop in mortgage rates did throw a monkey wrench in that sector,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colo., said before the report. “We’re looking for a solid spring season, but you may not see the big climbs in price until March, April and May.”
Estimates in the Bloomberg survey of 30 economists ranged from a decline of 1 percent to an advance of 5 percent.
Stocks remained lower after the figures, with the Standard & Poor’s 500 Index declining 0.1 percent to 1,840.25 at 10:04 a.m. in New York.
Purchases dropped 4 percent from the year prior on an unadjusted basis after a 2.7 percent decrease in the 12 months ended in October, the NAR reported.
The pending sales index was 101.7 on a seasonally-adjusted basis. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the Realtors group.