Pending Home Sales Bounce Back from 3-Month Slump

Pending home sales rebounded in October following three months of declines but remained off their pace from a year ago, the National Association of Realtors said yesterday.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but was 0.6 percent below a year ago.

Regionally, pending home sales in the South jumped by 7.4 percent to 123.6 in October and improved by 2.0 percent from a year ago, only partially offset by the West, where the index fell by 0.7 percent in October to 101.6 and by 4.4 percent from a year ago. The Northeast rose by 0.5 percent to 95.0 in October, but fell by 1.9 percent from a year ago. In the Midwest the index increased by 2.8 percent to 105.8 in October, but fell by 0.9 percent from a year ago.

“The housing market appears to be finally putting the hurricane disruptions behind it,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Pending sales tend to lead closings, or existing sales, by four to six weeks. The South accounts for slightly more than 40 percent of existing home sales, so October’s bump should be good news for existing sales in November and December.”

Vitner noted with inventory shortages most acute in the west, “pending sales there have underperformed the nation for the past few years.”

NAR Chief Economist Lawrence Yun said October’s increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market,” he said. “Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 1991. Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”