NEW YORK (THESTREET) -- Contracts signed to purchase previously-owned homes slipped for the fifth straight month in October, as the government shutdown pushed buyers to the sidelines.
The National Association of Realtors' Pending Home Sales Index declined 0.6% to 102.1 from an upwardly revised reading of 102.7 in September. Year-over-year, the index is down 1.6% and is at its lowest level since December 2012.
Contract activity was mixed, with the index declining as much as 4.1% in the West. Pending home sales declined 0.8% in the South, while there were modest gains in the Northeast and Midwest.
Extremely tight inventory in the high-cost West region was holding back activity, according to NAR.Pending Home Sales , which reflects signed contracts as opposed to closings, is considered a useful predictor of existing home sales. Lawrence Yun, chief economist at the NAR, said part of the decline in activity could be attributed to the government shutdown. In a survey, 17% of realtors reported delays in October, mostly from waiting for IRS income verification for mortgage approvals. Higher home prices, limited inventory of homes and higher interest rates added to already tight credit conditions have weighed on buyer demand in the last several months. Yun expects conditions to ease if job creation continues and mortgage underwriting standards ease once there is greater clarity over new mortgage lending rules that take effect in 2014.
-- Written by Shanthi Bharatwaj in New York.