Pending Home Sales Jump to Year High

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pending home salesWASHINGTON -- The number of Americans who signed contracts to buy homes 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 that its index of sales 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 homebuying 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.

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But a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than the bid. A sale isn't final until a mortgage is closed.

Even with the gains, contracts to buy homes 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 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 sales since the housing bubble burst. Sales of previously occupied homes could end up being the fewest since 1997. And sales of new homes are headed for their 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 that prices will keep falling.

The number of people who signed home 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.

See also:
Viewpoint: Is The Housing Crisis Just a State of Mind?
Survey: Most Boomers Would Cover Kids' Down Payment
How Much Can You Afford? [Video]

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