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US pending home sales edge up slightly in September: NAR

H.S. Borji
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Contracts to buy existing homes edged up slightly in September, supporting expectations for a stronger pick up in housing activity in the coming months.

The pending home sales index, a forward-looking indicator of US home sales, increased 0.3 percent to 105.0 in September, following a decline of 1 percent a month earlier, the National Association of Realtors reported today. The median estimate of economists called for an increase of 0.5 percent.

Compared to September 2013, the pending home sales index was 1 percent higher. September was the first time in 11 months pending home sales were above year-ago levels, the NAR said.

September marked the fifth consecutive month the pending home sales index was above 100.0, which represents the average level of contract activity.

Compared to August, contract activity increased in three of the four US regions. The pending home sales index increased 1.2 percent to 87.5 in the Northeast, 1.4 percent to 118.5 in the South and 0.8 percent to 101.3 in the West. The index declined 1.2 percent to 101.2 in the Midwest, NAR data showed.

Pending home sales reflect contract activity for existing single-family homes, which is the largest segment of the residential real estate market. They allow economists to determine the pace of existing home sales, which are based on contract closings.

“Housing supply for existing homes was up in September 6 percent from a year ago, which is preventing prices from rising at the accelerated clip seen earlier this year,” said NAR chief economist Lawrence Yun in a statement. “Additionally, the current spectacularly low mortgage rates should help more buyers reach the market.”

However, tight credit conditions continue to hamstring potential buyers.

“Of the reasons for not closing the sale, about 15 percent of Realtors in September reported having clients who could not obtain financing as the reason for not closing,” the NAR said.

The latest batches of home sales and construction data suggest America’s housing recovery was gaining momentum. Home buyers are taking advantage of declining mortgage rates, which according to Freddie Mac fell last week to the lowest level since June 2013. The average commitment on a 30-year fixed rate mortgage was 3.92 percent last week. For a 15-year fixed term, the average mortgage rate was 3.08 percent.

Last week the NAR said existing home sales rose more than forecast in September, climbing 2.4 percent to a seasonally adjusted annual rate of 5.17 million. Economists forecast an increase of 1 percent. That was the highest level this year.

The sale of new homes edged up 0.2 percent in September to a seasonally adjusted annual rate of 467,000, the Commerce Department reported last week. Compared to September 2013, new home sales were up 17 percent.

Meanwhile, housing construction rebounded in September, government data revealed earlier this month. Housing starts increased 6.3 percent to a seasonally adjusted annual rate of 1.017 million units. Building permits – a gauge of future construction – increased 1.5 percent to 1.018 million.

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