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WASHINGTON (Reuters) — Pending sales of existing homes fell less than expected in October, Realtors said Tuesday, raising cautious optimism of some stability in the distressed housing market.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in October, slipped 0.7% to 88.9 from an upwardly revised reading of 89.5 in September.
October’s reading was 1.0% lower than a year earlier. Economists polled by Reuters ahead of the report were expecting pending home sales to drop 3.2%.
Pending sales declined by a revised 4.3% in September.
“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” said Lawrence Yun, the association’s chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”
U.S. government bond prices, which tend to benefit from any bad news about the economy, pared some gains on the report.
The collapse of the U.S. housing market has unleashed the worst financial crisis since the Great Depression and plunged many major economies into recession. Stability in the housing market is key to any economic recovery, economists say.
“We’ve seen some stabilizing in existing home sales. But it doesn’t mean the whole market is recovering. We are going see some favorable moves in home sales on the margin with the recent plunge in mortgage rates,” said Lindsey Piegza, market analyst at FTN Financial in New York
Across the country, pending home sales plunged 8.7% in the West, and tumbled 4.3% in the Midwest. In the South pending sales surged 7.8% and gained 0.6% in the Northeast.
NAR is forecasting existing home sales of 4.96 million this year, rising to 5.19 million next year and 5.55 million in 2010. It is predicting new-home sales at 486,000 in 2008, declining to 393,000 in 2009 and rising to 446,000 in 2010.
Housing starts, including multifamily units, will probably total 934,000 units in 2008, easing to 731,000 next year before increasing to 772,000 in 2010, the NAR says.
It forecast the 30-year fixed-rate mortgage averaging 5.6% in the first quarter of 2009, rising to 6.0% by year-end and averaging 6.2% in 2010.
Copyright 2008 Reuters Limited
