Pending Home Sales in U.S. Declined to Four-Year Low in October
(Bloomberg) -- Contract signings to purchase previously-owned U.S. homes unexpectedly fell by the most since January, reaching the lowest level since mid-2014 amid mounting evidence that the housing market is struggling.
The index of pending home sales dropped 2.6 percent, after a 0.7 percent gain the previous month, according to data Thursday from the National Association of Realtors in Washington. That missed the median estimate in Bloomberg’s survey calling for a 0.5 percent rise. The gauge was down 4.6 percent from a year earlier on an unadjusted basis, following a 3.3 percent decrease.
- The results underscore the challenges as elevated prices and rising mortgage rates are keeping more Americans on the sidelines of the housing market. Economists consider pending-home sales a leading indicator because they track contract signings; purchases of existing homes are tabulated when a deal closes, typically a month or two later.
- The recent rise in mortgage rates has “reduced the pool of eligible homebuyers,” Lawrence Yun, NAR’s chief economist, said in a statement. While the job market looks strong, making long-term prospects look solid, “we just have to get through this short-term period of uncertainty.”
- Pending sales fell in three of four regions, led by a an 8.9 percent slump in the West as the Midwest and South also declined. Signings in the Northeast rose 0.7 percent.
- The index level of 102.1 was the lowest since July 2014.
- While the report is in line with the view that housing isn’t expected to collapse, the industry may have trouble gaining traction. Previously-released data showed new home sales fell in October to the weakest pace since March 2016, while purchases of previously owned houses rose for the first time in seven months.
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