Home sales contracts highest in a year
Home sales pending index reaches 99.3 in October, a 10.4 percent increase from September. But a recovery in home sales doesn't look imminent.
This weekend photo shows a home with a sale pending sign in Palo Alto, Calif. The number of Americans who signed contracts to buy homes jumped in October to the highest level in a year. But a recovery in home sales isn't expected anytime soon.
Paul Sakuma/AP
WASHINGTON
The number of Americans who signed contracts to buy聽homes聽jumped in October to the highest level in a year. But the gain follows three months of declines and isn't enough to signal a housing recovery.
The National Association of Realtors said Wednesday its index of聽sales聽agreements rose 10.4 percent last month to a reading of 93.3.
A reading of 100 is considered healthy. The last time it was that high was in April 2010, one month before a federal home-buying tax credit expired.
Contract signings usually indicate where the housing market is headed. There's typically a one- to two-month lag between a signed contract and a completed deal.
But a growing number of buyers have canceled contracts after appraisals showed the聽homes聽were worth less than the bid. A聽sale聽isn't final until a mortgage is closed.
Even with the gains, contracts to buy聽homes聽are roughly at the same level as they were before the tax credit expired, said Joshua Shapiro, chief U.S. economist at MFR Inc.
"In absolute terms, this is a very depressed level," he said.
Homes聽are the most affordable they've been in decades. Long-term mortgage rates are hovering near historic lows and prices in some metro areas have tumbled.
Yet, this year could be the worst year for聽sales聽since the housing bubble burst.聽Sales聽of previously occupiedhomes聽could end up being the fewest since 1997. And聽sales聽of new聽homes聽are headed for the worst year on records dating to 1963.
Americans are holding off for a number of reasons. High unemployment and weak job growth have deterred many would-be buyers. Loans are also harder to come by. Many lenders are requiring 20 percent down payments and strong credit scores to qualify. Even those who have good credit and stable jobs are hesitant to buy because they are worried prices will keep falling.
The number of people who signed聽home聽contracts had risen in both May and June before falling 7 percent over the past three months.
Contract signings rose across most of the country. October's index increased 24.1 percent in the Midwest, 17.7 percent in the Northeast and 8.6 percent in the South. It fell 0.3 percent in the West.