WASHINGTON – Slightly more Americans signed contracts to buy homes in October, a modest rebound after two prior monthly declines. The figures add to evidence that the housing market has lost some of its momentum after rapid sales growth earlier this year.
The National Association of Realtors said Monday that its seasonally adjusted pending home sales index rose 0.2 per cent to 107.7 last month. The index has increased 3.9 per cent over the past 12 months.
“The data suggest that growth in home sales has slowed significantly,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
O’Sullivan added, though, that because the reports are so volatile, it may be early to jump to broader conclusions.
Healthy job gains and low mortgage rates boosted sales for much of the year. But rising home values and limited inventories have limited further growth in the closing months of 2015.
The Realtors reported last week that finalized sales have risen 3.9 per cent from a year ago, even as buyers have fewer choices because the number of listings on the market has dropped 4.5 per cent. A narrow selection of homes on the market has pushed up sales prices 5.8 per cent from a year ago to a median of $219,600.
Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.
The housing market had benefited from hiring that has cut unemployment to 5 per cent, down from 5.7 per cent a year ago. Average hourly earnings have improved 2.5 per cent over the past year — that slight increase enhanced by low inflation. But wage growth has failed to match the rise in home values, forcing more would-be homebuyers to wait and save for a down payment.
Also aiding sales have been lower borrowing rates. Mortgage rates remain well below their historic average of 6 per cent. The average, 30-year fixed mortgage rate was 3.95 per cent last week, according to mortgage buyer Freddie Mac.
But the market is still recovering more than six years after the end of the Great Recession. Home sales have been uneven in different geographic regions. The number of signed contracts advanced in the Northeast and West, while dipping in the Midwest and South.