Pending Home Sales Surge Unexpectedly in October

Industry data released Thursday showed that the number of contracts signed for home purchases climbed in October. The news came as a surprise to analysts and industry professionals who have been anticipating a continued falloff in buyer demand due to the typical seasonal slowdown in home sales, compounded by concerns that servicers’ affidavit problems could muddy some transactions.

The National Association of Realtors (NAR) says its gauge of pending home sales rose 10.4 percent for the month of October. The trade group’s index is based on contracts signed during the month for purchases of previously owned homes. Actual closings typically lag contract signings by one to two months.

The October increase follows a 1.8 percent drop in pending sales for the month of September. Economists surveyed by Bloomberg News were forecasting another decrease of 1.0 percent in the latest numbers.

NAR’s pending sales reading remains 20.5 percent below the measurement documented in October 2009, but that’s when first-time homebuyers were rushing to ink their names to deals to take advantage of the federal tax credit.

Following the expiration of the final tax credit offering this spring, the pending sales index plunged a staggering 30 percent in May and then fell further to a cyclical low in June. October’s increase represents the third rise recorded since that low was hit.

Commenting on the latest numbers, Paul Dales, U.S. economist for Capital Economics, said, “The surge in the U.S. pending home sales index in October is the first piece of good news on the housing market for some weeks. But it doesn’t alter our view that a weak housing rebound will continue to hold the wider economic recovery back…”

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