October Pending Home Sales Inch Forward

Pending home sales edged up slightly in October, managing a meager gain for the second consecutive month, the National Association of Realtors reported yesterday.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by 0.1 percent to 110.0 in October from a slight downward revision of 109.9 in September. The index rose by 1.8 percent higher from a year ago.

Regionally, results were mixed. The largest region, the South saw a 1.3 percent decline to 120.1 in October but improved by 1.2 percent from a year ago. In the Northeast, pending sales nudged forward by 0.4 percent to 96.9 and improved by 3.9 percent from a year ago. In the Midwest the index rose by 1.6 percent to 106.3 and by 1.2 percent from a year ago. In the West, the index rose by 0.7 percent to 108.3 and by 2.5 percent from a year ago.

“Long-term mortgage rates have continued to march higher in the aftermath of the U.S. presidential election,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “While contract signings have held steady, rising mortgage rates, coupled with higher home prices, will likely place a strain on affordability and sales activity.”

NAR Chief Economist Lawrence Yun noted October’s uptick nudged pending sales up to their highest level since July (111.2). “Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” he said. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”

The current market favors buyers, Yun said. “Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range,” he said. “Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around 4 percent since the election.”