Last month the number of contracts to buy previously owned homes in the United States hit a 10 month low. However the services sector showed a strong rebound in activity earlier this month so experts are hopeful the economy is reasonably resilient as the year draws to a close.
According to the article in aol.com, this was the fifth consecutive month of declines in contracts, and these figures could indicate that the number of resales will be limited for the rest of the year. Figures from the National Association of Realtors showed the pending home sales index, which is based on contracts signed the previous month fell to 102.1, a decline of 0.6%, the lowest level since December last year. This suggests that home sales towards the end of the year will remain sluggish, and economists have pointed out that constrained financial conditions earlier on this summer had a negative effect.
Economist had been predicting that pending home sales would rise by 1.3% in October, and think these weak figures could prompt the Federal Reserve to stick to its current bond buying program, at least until early 2014. The housing market has been targeted by the US central bank as being a means of speeding up job creation and boosting economic growth. In addition it’s likely that the partial shutdown of the federal government in October side-lined some potential buyers. A survey by the National Association of Realtors found some 17% of buyers had faced contract signing delays due to having to wait for the Internal Revenue Service to verify their income before they could gain mortgage approval. Even though real estate agents are hopeful that the number of contracts will bounce back, the lack of inventory is a problem.
In spite of this the early signs for November look more promising. Data on mortgage purchase application volumes shows an increase in the middle of the month, although prior to this levels had been low. Home sales have been affected by recent increases in mortgage rates, but even though the housing market may be cooling the good news is that the economy seems to have retained some of the momentum produced during the third quarter.
Other data shows that the recovery of the labor market in the US is still in progress, and that confidence is increasing. As such experts feel that home sales will again start trending upwards during the coming months. The numbers of pending home sales were up in the Midwest and Northeast but fell by 4.1% in the West.