Pending Home Sales Jump 10.4% in October

Pending home sales took a big jump in October, surgingrn10.4 percent above October figures and ending 9.2 percent higher than one yearrnearlier.  The Pending Home Sales Indexrnissued by the National Association of Realtors® (NAR) rose from 84.5 inrnSeptember to 93.3.  One year ago thernindex stood at 85.5.</p

The Index is a measure of homernpurchase contracts written but not closed during the subject month and is arnforward indicator of future sales. rnClosings are generally expected to follow within one to two months.  Realtors, however, have been reportingrnunusually high levels of contract cancellations in recent months.</p

Lawrence Yun, NAR chief economist,rnsaid improved contract activity is a hopeful sign.  “Home sales have been plodding along at arnsub-par level while interest rates are hovering at record lows and there is arnpent-up demand from buyers who normally would have entered the market in recentrnyears.  We hope this indicates morernbuyers are taking advantage of the excellent affordability conditions,” he said.</p

The Midwest region saw the greatestrnappreciation in signed contracts, up 24.1 percent to 88.7 in October and 13.2rnpercent higher than in October 2010.  Inrnthe Northeast pending sales were up 17.7 percent to 71.3 and are 3.4 percent higherrnthan a year earlier.  The South rose 8.6rnpercent in October to an index of 99.5, an increase of 9.7 percent year-over-year.rn In the West the index slipped 0.3rnpercent to 105.5 in October but is 8.1 percent above a year ago.</p

“Although contract signings are up,rnnot all contracts lead to closings. Yun said. rn ‘Many potential home buyersrninadvertently hurt their credit scores and chances of getting a mortgage throughrneasily averted actions, such as cancelling an old credit line while taking on arnnew one,” Yun said.  “Such actions couldrnunwittingly prevent buyers from obtaining a mortgage if their credit score isrnclose to the margins of qualifying, or they might get a loan but with lessrnfavorable terms.”</p

ThernPending Home Sales Index is based on a large national sample, typicallyrnrepresenting about 20 percent of transactions for existing-home sales.  An index of 100 is equal to the average levelrnof contract activity during 2001, which was the first year to be examined asrnwell as the first of five consecutive record years for existing-home sales; it thusrncoincides with a level that is historically healthy.

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