Tags: Pending Home Sales Unexpectedly Surge 10 Percent

Pending Sales of Existing Homes Rose Record 10 Percent in October

Thursday, 02 December 2010 10:14 AM

More Americans unexpectedly signed contracts to buy previously owned homes in October, easing concern that the absence of government support is destabilizing the housing market.

The index of pending home resales jumped a record 10 percent after dropping 1.8 percent in September, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 1 percent decrease. The group’s data go back to 2001.

Low borrowing costs and reduced prices may attract some buyers, helping housing regain its footing after the end of a tax credit caused demand to slump. Even so, rising foreclosures and unemployment near 10 percent indicate the industry at the center of the last recession will take years to rebound.

“Demand is slowly going to get better,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Next year will probably be better for home sales. We’re seeing improvement in the labor market but it’ll take time.”

Another report today showed fewer Americans filed claims for unemployment insurance payments over the past month, showing the job market is beginning to improve.

The number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. Claims increased by 26,000 last week, more than forecast, to 436,000, after reaching a two-year low.

Decreasing Trend

“Lower lows and lower highs define a downward trend, and that’s what seems finally to be emerging,” Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York, said in a note to clients. “If it continues, we should expect to see better payroll numbers over the next few months.”

A Labor Department report tomorrow may show employers added 145,000 workers last month and the unemployment rate held at 9.6 percent.

The projected decrease in pending home sales was based on the median of 40 forecasts in the Bloomberg survey. Estimates ranged from a drop of 4.8 percent to a gain of 3 percent.

Three of four regions saw an increase, today’s report showed. That included gains of 27 percent in the Midwest, 20 percent in the Northeast and 7.1 percent in the South. Purchases fell 0.4 percent in the West.

Compared with October 2009, pending sales were down 22 percent.

Fed View

Housing is an ongoing concern for Federal Reserve policy makers, who last month announced additional asset purchases to spur growth and reduce unemployment. Their Beige Book report, released yesterday, showed the economy strengthened across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.

“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks,” the Fed said in the report, which is based on anecdotal information.

Pending home sales are considered a leading indicator because they track contract signings. Purchases of previously owned homes are tabulated when a contract closes, typically a month or two later.

Sales of existing homes, which now make up about 90 percent of the market, fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted the market, data from the Realtors group showed last week. In July, sales ran at the weakest pace in records going back a decade.

Credit’s Influence

The tax credit worth as much as $8,000 required contracts be signed on April 30 and closed by Sept. 30. Many of the closings occurred in May and June because the original incentive called for transactions to be completed by June 30.

Companies including Beazer Homes USA Inc., which builds houses for first-time buyers, are cautious about next year.

“Sustained high unemployment levels and the overhang of foreclosures make it very difficult to predict when and to what extent the housing market will recover,” Ian McCarthy, chief executive officer of Atlanta-based Beazer, said on a conference call with analysts on Nov. 5.

House prices also are depressed. The S&P/Case-Shiller index of property values in 20 cities climbed in September from a year earlier by the least since January, figures showed this week. Compared with the prior month, after adjusting for seasonal variations, the gauge dropped by the most since April 2009.

© Copyright 2020 Bloomberg News. All rights reserved.

1Like our page
More Americans unexpectedly signed contracts to buy previously owned homes in October, easing concern that the absence of government support is destabilizing the housing market.The index of pending home resales jumped a record 10 percent after dropping 1.8 percent in...
Pending Home Sales Unexpectedly Surge 10 Percent
Thursday, 02 December 2010 10:14 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved