Pending Sales of Previously Owned Homes in U.S. Increase 0.2%

30 Nov 2015 | Author: | No comments yet »

Pending Home Sales Rise 0.2% in October.

Contract signings to purchase previously owned U.S. homes rose less than forecast in October after declining in the prior two months, showing residential real estate is cooling heading into the quieter selling season.

Pending home sales were mostly unchanged in October, but shifted marginally higher after two straight months of declines, according to the National Association of Realtors®. The Pending Home Sales Index,* a forward-looking indicator based on contract signings, inched 0.2 percent to 107.7 in October from an upwardly revised 107.5 in September and is now 3.9 percent above October 2014 (103.7). At the same time, steady hiring gains and early signs of a pickup in worker pay probably will continue to support housing demand even after a recent gain in borrowing costs in anticipation of an increase in the Federal Reserve’s benchmark interest rate. “In the most competitive metro areas — particularly those in the South and West — affordability concerns remain heightened as low inventory continues to drive up prices,” NAR chief economist Lawrence Yun said in a statement. Purchase contracts rose 2.1 percent in the 12 months ended in October on an unadjusted basis after a 3.2 percent annual gain in September, the NAR report showed.

With demand expected to remain stable through the final two months of the year, he forecasts existing-home sales to finish 2015 at a pace of 5.30 million – the highest since 2006. Although further expansion in existing-sales is expected next year, ongoing inventory shortages and affordability pressures from rising prices and mortgage rates will likely temper sales growth to around 3 percent (5.45 million) in 2016. That report showed sales of previously owned homes, roughly 90% of the overall housing market, reached a post-recession peak of a 5.58 million annual pace in July, and hovered slightly below that level this fall. Supported by historically low interest rates on mortgage loans and steady hiring, the housing market has been a bright spot for the economy this year.

Mortgage interest rates have been rising for the past several weeks and could see bigger gains going into 2016 if the Federal Reserve raises its long-term rates in December. Home purchases signal that consumers have confidence in the economy, and typically coincide with increased spending on appliances, furniture and home improvements. Economists are watching the sector to see if it can maintain momentum in the face interest rates increasing from record lows and a limited selection of homes pushing up prices.

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