
Pending Home Sales Rebound 10.4% in October
(Pending home sales article updated with additional commentary and background details.)
WASHINGTON (
) -- Pending home sales rose 10.4% in October, according to a National Association of Realtors report released Thursday morning.
An index that measures the number of contracts to buy previously owned homes in the U.S. rose 10.4% in October month-over-month to a reading of 80.9. The index remains 20.5% lower than year-earlier levels. October 2009 saw the highest level of pending home sales since May 2006 when it hit a reading of 112.6.
Economists had expected the data to be flat after
a 1.8% downtick in September. September's rate of pending home sales came in worse than expected and was 24.9% lower than in the year-earlier month.
Pending home sales are viewed as an indicator of future home sales.
>>Homebuilder Stocks: Behind the Numbers
"It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011," said Lawrence Yun, NAR chief economist, who said excellent housing affordability conditions are drawing home buyers.
"More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery," Yun said.
The economist added that he expects home sales to continue the upward trend from their cyclical low over the summer.
"Even so, we now have some consumer concerns regarding the mortgage interest deduction, an important component in housing affordability," he said. "Preliminary results of a new survey show nearly three out of four home owners and two out of three renters consider the mortgage interest deduction to be extremely or very important to them. Home owners already pay between 80% and 90% of all federal income taxes and additional tax burden would hurt them and the economic recovery, so we have a reasonable hope that it will not be changed."
Across the U.S.,
sales of newly built homes unexpectedly fell 8.1% in October to a weaker-than-expected annual rate of 283,000, according to data released by the Commerce Department last week.
>>New-Home Sales Fall 8.1% in October
|
The government data followed a report from the National Association of Realtors which showed that
sales of previously occupied homes fell 2.2% in October to a slightly better-than-expected seasonally adjusted annual rate of 4.43 million units.
>>Existing-Home Sales Fall 2.2% in October
Homebuilders began construction on 11.7% fewer homes in October to an annualized rate of 519,000, far worse than the expected contraction rate. Applications for building permits, meanwhile, inched 0.5% higher to 550,000, from 547,000.
>>Housing Starts Fall 11.7% in October
Near-record-low mortgage rates failed to spark robust demand for housing in recent months, but continue to have an effect on homeowners looking to lower their monthly payments through refinancing, though even refi activity has been waning as mortgage rates bounce off earlier lows.
The average rate on a 30-year fixed mortgage increased to 4.56% in the week ending Nov. 26, the Mortgage Bankers Association said early Wednesday, up from 4.5% in the prior week. It was the highest rate observed since August following increases in four of the last five weeks. Still, the rate remains near all-time lows.
>>Refi Activity Slows as Mortgage Rates Rise
As rates edged higher, the volume of mortgage loan applications decreased 16.5% on a seasonally adjusted basis.
Refinancing applications decreased 21.6% from the previous week to the lowest level observed since June. It was the third consecutive weekly drop in refinance activity. New-home purchase loan applications pushed 1.1% higher from the prior week to its highest level since the beginning of May.
A total of 74.9% of all loan applications last week were for refinancing existing mortgages, down from a 78.6% share observed in the prior week.
While any mortgage demand can be viewed in a positive light, the still-struggling housing market continues to be plagued by sluggish demand, in part because of the tight credit market and inability of many potential buyers to access the credit they need to finance a mortgage.
Many Americans suffer from negative equity, where the amount they owe on their home is higher than the value of it, making them unqualified for refinancing.
Still-depressed home prices do not seem to make it any easier. The S&P/Case-Shiller 20-city index of national home prices rose slightly in September but home prices across the U.S. fell 2% in third quarter after rising 4.7% in the second quarter.
September's 0.6% uptick disappointed market watchers who expected the index to rise 1% in the month.
>>Home Prices Continue to Cool
Several market watchers consider weakening home prices an ominous sign for the overall housing market.
"Another weak report, weaker than last month," said David M. Blitzer, chairman of the index committee at Standard & Poor's. "The national economy is certainly the number one issue for housing. Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off."
The housing market has been under tremendous pressure for some time, and demand fell further after the
springtime expiration of federal tax credits for homebuyers
that offered credits up to $8,000 for first-time buyers and $6,500 for those buying new primary residences.
>>4 Top Homebuilder Stocks: Life After the Tax Credit
Stocks in the homebuilder sector were mostly higher in early trading Thursday following the latest round of housing data.
The
SPDR S&P Homebuilders
(XHB) - Get Report
, an exchange-traded fund that tracks the homebuilder sector, rose 2.2%. The
iShares Dow Jones US Home Construction
(ITB) - Get Report
ETF added 3.1%.
Among individual builders,
Toll Brothers
( TOLL), which posted a surprise quarterly profit ahead of the opening bell Thursday morning, rose 3.3%.
PulteGroup
(PHM) - Get Report
jumped 4.5%,
Lennar
(LEN) - Get Report
5.7%,
KB Home
(KBH) - Get Report
4% and
D.R. Horton
(DHI) - Get Report
2%.
Small-cap builders
Hovnanian Enterprises
(HOV) - Get Report
and
Beazer Homes
(BZH) - Get Report
were higher by 4.7% and 5.2%, respectively.
-- Written by Miriam Marcus Reimer in New York.
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