The number of contracts to buy U.S. previously owned homes unexpectedly rose in October as consumers rushed to take advantage of a tax credit that was due to expire.
The index of signed purchase agreements, or pending home sales, climbed 3.7% to 114.1 after increasing 6% in September, the National Association of Realtors said today in Washington. The ninth consecutive gain compares with the median forecast of a decline in a Bloomberg News survey of economists.
The administration’s incentive for first-time buyers, which last month was extended into next year and expanded to include current owners, will help housing emerge from its worst slump since the 1930s. A jobless rate at a 26-year high and mounting foreclosures represent challenges that the industry will find difficult to overcome.
Sales were projected to fall 1% after an originally reported gain of 6.1% in September, according to the median of 37 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 5 percent to a 6.5% increase.
A separate report today showed manufacturing in the U.S. expanded in November for a fourth consecutive month. The Institute for Supply Management’s manufacturing index fell to 53.6, lower than economists forecast, from October’s three-year high of 55.7, according to the Tempe, Arizona-based group. Readings above 50 signal expansion.
Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group started publishing the index in March 2005, and data goes back to January 2001,
Compared with October 2008, pending sales were up 29%, the biggest year-over-year gain since records began.
President Barack Obama on Nov. 6 extended the $8,000-U.S. tax credit for first-time buyers until April 30 from Nov. 30, and expanded it to include some current owners.
Federal Reserve officials are doing their part to sustain the housing rebound by pledging to keep the benchmark interest rate near zero for an "extended period," according to their announcement last month. The average rate on a 30-year fixed mortgage was 4.78% last week, matching the last week in April as the lowest since Freddie Mac started keeping records in 1972.
Demand is steadying, reports showed last week. Combined sales of new and existing homes rose in October to a 6.53-million-unit annual rate, the highest level since June 2007.
One constraint on demand is the weak labor market. The economy has lost 7.3 million jobs since the recession began in December 2007. The unemployment rate may exceed 10% through the first half of 2010, a Bloomberg survey showed.
Mounting joblessness and falling property values have spurred home-loan defaults. The number of houses worth less than the debt owed on them reached almost 10.7 million, or 23% of all mortgaged properties, at the end of the third quarter, according to a report last week from First American CoreLogic.
