Pending home sales rose for the third month in November, a sign of the housing recovery’s resilience in the face of fiscal threats facing the U.S.
The index of pending home sales climbed 1.7 percent to 106.4, the highest reading since April 2010, after a revised 5 percent gain in October, the National Association of Realtors reported today in Washington. The median forecast in a Bloomberg survey called for a 1 percent advance.
Low borrowing costs and stable prices are drawing homebuyers three years after a recession triggered in part by a collapse in housing prices. Fewer foreclosures are coming onto the market, easing concerns that values could fall.
“Housing is building some momentum,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “There is a growing perception that now is a good time to buy. Prices are starting to tick up, mortgage rates are still rock-bottom and the job market has shown some signs of improvement.”
Another report today showed the economy picked up in December. The MNI Chicago Report’s business barometer rose to 51.6 in December, a four-month high, from 50.4 in November. A reading of 50 is the dividing line between expansion and contraction.
Stocks slumped, sending the Standard & Poor’s 500 Index lower for a fifth day, amid concern talks between President Barack Obama and Republican lawmakers may not yield a budget deal by the year-end deadline. The 500 Index fell 0.6 percent to 1,408.99 at 10 a.m. in New York.
Estimates for pending home sales in the Bloomberg survey of 35 economists ranged from a 2.7 percent drop to an increase of 6 percent.
Three of four regions showed a gain last month, including a 5.2 percent increase in the Northeast and a 4.2 percent advance in the West. Sales contracts were little changed in the South.
Pending sales are considered a leading indicator because they track purchase contracts in advance of actual transactions, which are tabulated a month or two later. Existing or previously owned homes account for more than 90 percent of the housing market.
Sales of existing homes reached a three-year high in November, rising 5.9 percent to a 5.04 million annual rate, the Realtor group reported last week.
New-home sales, also logged when contracts are signed, rose 4.4 percent in November to a 377,000 annual pace, the highest level since April 2010, the Commerce Department reported yesterday.
Property values, too, are picking up. The S&P/Case-Shiller index last week showed home prices rose 4.3 percent in October from a year earlier, the biggest 12-month advance since May 2010.
Record-low borrowing costs have helped fuel demand for would-be buyers who qualify for financing. The average rate on a 30-year, fixed-rate mortgage was 3.35 percent this week, according to Freddie Mac. A late November reading of 3.31 percent was the lowest in data going back to 1972.
Federal Reserve policy makers this month expanded asset purchases in a continuing bid to reduce unemployment and spur growth. Chairman Ben S. Bernanke has said that tight credit availability remains a concern to the housing market.
Homebuilders are taking advantage of strong demand and tight inventory by breaking ground on new communities and raising prices. Toll Brothers Inc. (TOL) and KB Home (KBH) are reporting stronger traffic at their sales offices.
“New demand is now being created due to increased urgency to take advantage of incredible affordability as prices are now on the rise,” KB Home Chief Executive Officer Jeff Mezger said on a Dec. 20 earnings call. “While it’s been a few years in the making, housing is becoming a bright spot for the economy and the industry is once again positioned to play its historical role of being a job creator and leading the national economy into a full recovery.”
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