Contract signings to purchase previously owned homes rose less than forecast in October after declining in the prior two months, showing residential real estate is cooling heading into the quieter selling season.
An index of pending home sales increased 0.2% in October after a revised 1.6% decline a month earlier, the National Association of Realtors said Monday. Economists projected a 1% advance last month, according to the Bloomberg survey median.
Lean inventories of available properties are limiting choices for prospective buyers who qualify for credit. At the same time, steady hiring gains and early signs of a pickup in worker pay probably will continue to support housing demand even after a recent gain in borrowing costs in anticipation of an increase in the Federal Reserve's benchmark interest rate.
"In the most competitive metro areas — particularly those in the South and West — affordability concerns remain heightened as low inventory continues to drive up prices," NAR chief economist Lawrence Yun said in a statement.
Purchase contracts rose 2.1% in the 12 months ended in October on an unadjusted basis
The pending sales index was 107.7 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 increased in two of four regions, led by a 4.5% gain in the Northeast. Purchase contracts were up 1.7% in the West. They fell 1.7% in the South and 1% in the Midwest.
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.
Home resales, which make up about 90% of the market, retreated in October from the second-highest level since 2007, the NAR reported last week. Prices increased compared with a year earlier as the number of dwellings on the market declined.
