Pending Home Sales
Gregory Bull/AP
By Lucia Mutikani

WASHINGTON -- Contracts to buy previously owned U.S. homes hit a 10-month low in October, but a strong rebound in services sector activity early this month suggested some resilience in the economy as the year winds down.

The National Association of Realtors said Monday its pending home sales index, based on contracts signed last month, slipped 0.6 percent to 102.1, the lowest level since December.

It was the fifth straight month of declines in contracts and suggested home resales could remain on the back foot for the rest of this year. These contracts become sales after a month or two. Home resales fell in October for a second straight month.

"The data suggest sluggish home sales going into the end of the year and that the tightening of financial conditions this summer did have a negative impact," said Yelena Shulyatyeva, economist at BNP Paribas in New York.

Economists, who had expected pending home sales to rise 1.3 percent in October, said the weak home sales trajectory could see the Federal Reserve sticking to its $85 billion monthly bond buying program at least until early next year.

The U.S. central bank has targeted housing as a channel to boost growth and speed up job creation.

The Realtors group said October's 16-day partial shutdown of the federal government had sidelined potential buyers.

According to NAR, a survey of realtors found 17 percent of respondents reported delays in signing contracts because they had to wait for the Internal Revenue Service to verify income before the mortgage could be approved.

The group expected a bounce back in contracts, but it cautioned that lack of inventory remained a constraint.

Promising Signs

"Early data for November look a little better, with separate data on mortgage purchase application volumes perking up in the middle of the month from a very low level," said Daniel Silver, an economist at JPMorgan in New York.

"The weekly purchase application data are very volatile, but it is possible that this signals activity picking up to some degree very recently or at least flattening out." Home sales have been muted by a rise in mortgage rates. Though housing is cooling, the economy appears to have retained some of the upward momentum from the third quarter.

In a separate report,
financial data firm Markit said its preliminary Purchasing Managers Index for the services sector rose to 57.1 this month from a record low 49.6 in October.

This is the first month that Markit is publishing data on the services industries, which it has been compiling since October 2009. Readings above 50 signal expansion in the services industries.

The services sector survey adds to data such as retail sales and nonfarm payrolls that have painted a fairly upbeat picture of the economy early in the fourth quarter.

Economists expect a slowdown in gross domestic product growth this quarter as businesses cut back on inventories after rapidly accumulating stocks in the July-September quarter.

"With other data showing the recovery in the labor market still on track, and confidence moving up again, we expect home sales to start trending up again in coming months," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.

"For now, though, the weaker data are a reason for the Fed to remain cautious about tapering."

Pending home sales were up in the Northeast and Midwest. They dropped 4.1 percent in the West.

Increase your money and finance knowledge from home

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

The hosand markets will be slow for some tme- many kids now stay at home wih their parents till graduation day in college. The long range home sales will be slow for the foreseeable future ; till the college grads can get jobs.. Eliminating Fannie & Freddie programs may be the the best roads to travel ,on ; as they partly caused the housing calamity.

November 26 2013 at 4:28 AM Report abuse rate up rate down Reply

my parents in law recently purchased Cadillac CTS-V Coupe only from working parttime off a home computer. Visit Website Bar29.COM

November 25 2013 at 2:34 PM Report abuse rate up rate down Reply


November 25 2013 at 2:25 PM Report abuse -2 rate up rate down Reply
1 reply to mzackcpa's comment

LOL, joke.

November 25 2013 at 4:03 PM Report abuse +1 rate up rate down Reply