Contracts to purchase previously owned homes rose less than forecast in September, showing housing will take time to gain momentum.
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Still-tight credit and low inventories remain hurdles for a sluggish housing recovery that’s still healing more than five years after the downturn. More Americans are being helped by faster progress in the employment picture, allowing those who are able to get a mortgage the opportunity to take advantage of historically low rates.
"We see few signs now of further momentum," Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, N.Y., said in a research note. "We are hopeful, however, that the dip in mortgage rates in recent weeks, coupled with the continuing improvement in the labor market, will trigger at least a modest renewed upturn by the end of the year."
Stocks fell, paring gains from last week's rally that was the biggest since January 2013, as energy producers slumped with lower oil prices. The Standard & Poor’s 500 Index declined 0.4% to 1,956.35 at 10:13 a.m. in New York.
Estimates in the Bloomberg survey of 41 economists forecasting pending home sales ranged from a decline of 1.5% to an advance of 2.5%.
Purchase contracts climbed 1% in the 12 months ending in September after a 4.1% annual decline in August, the NAR report showed. Last month marked the first year-over-year increase since September 2013.
The pending sales index was 105 on a seasonally adjusted basis. A reading of 100 corresponds to the average level of contract activity in 2001, or "historically healthy" home-buying traffic, according to the NAR.
Pending sales rose in two of four regions from the prior month, with the South up 1.4% and the Northeast advancing 1.2%. Purchase contracts declined 1.2% in the Midwest and 0.8% in the West.
Economists consider pending sales a leading indicator because they track new purchase contracts. Existing-home sales are tabulated when a deal closes, usually a month or two later.
Those re-sales rose last month to a 5.17 million annual rate, the highest level in a year, NAR data showed last week. Construction also picked up in September as housing starts climbed 6.3% to a 1.02 million annualized rate, supported by a bigger increase in multifamily projects than for single-family properties.
Declining borrowing costs will help make big-ticket purchases such as homes more affordable. The average rate on a 30-year, fixed mortgage fell to 3.92% in the week ended Oct. 23, the lowest since June 2013, according to Freddie Mac data.
The rate has dropped by 0.27 percentage point over the past three weeks as concern over slowing global growth pushed investors out of stocks and into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.
"The current spectacularly low mortgage rates should help more buyers reach the market," NAR chief economist Lawrence Yun said in a statement.
Payroll gains on pace for their best year since 1999 also are bolstering potential home buyers. Employers have added an average 227,000 jobs per month through September. The unemployment rate has fallen to 5.9% from 6.7% at the end of last year. The Labor Department will release October figures Nov. 7.
A stronger pickup in wages would help keep housing within reach for more Americans even as credit standards remain tight. Average hourly earnings rose 2% in September from a year earlier, compared with a 3.1% advance in December 2007, as the past recession was starting.
Homebuilders such as Westlake Village, Calif.-based Ryland Group Inc. are pointing to economic circumstances that are supporting the industry while acknowledging the pace of improvement has been modest.
The industry is seeing advances "thanks to a strengthening employment picture, a favorable affordability dynamic and a low level of housing inventory," Chief Executive Officer Larry Nicholson said on an Oct. 23 earnings call. At the same time, the housing market "still has a long way to go before returning to long-term norms."
