An October housing surprise: Home purchase contracts jump 10.4%
Housing analysts were both abuzz and perplexed Thursday after an industry group said pending home sales unexpectedly jumped 10.4% in October.
Sales of U.S. homes have been weak since the summer after the boost from a popular federal tax credit for buyers vanished. Analysts had not been expecting such a big increase, particularly given the sour state of the job market and weak consumer confidence.
Paul Dales, U.S. Economist with Capital Economics, called the surge "the first piece of good news on the housing market for some weeks."
"But it doesn't alter our view that a weak housing rebound will continue to hold the wider economic recovery back," he added.
Michael D. Larson, a housing and interest rate analyst with Weiss Research, said the data point to a consumer with a bargain-hunting mindset.
"The latest numbers contrast sharply with the lousy new home sales figures we recently got, suggesting that the used home market continues to capture the imagination of buyers," he said. "They're seeking out the best values, and right now, that means distressed used homes at attractive -- even fire sale -- prices."
"While I don't expect a vigorous recovery in housing, the data continues to point to stabilization."
Ian Shepherdson, chief U.S. economist with High Frequency Economics, also signaled cautious optimism over the increase.
"The numbers are consistent with November existing home sales rising to about 4.9 million, roughly the trend prevailing before the tax credits started to distort activity in the spring of 2008," Shepherdson said. "We are a bit skeptical of the sustainability of the increase, but we are happy to see it nonetheless."
The National Assn. of Realtors said its pending home sales index, a forward-looking indicator that gives a read on the number of home purchase contracts signed, rose to 80.9 in October. The index remains 20.5% below October 2009.
An index reading of 100 is equal to the level of contracts signed in 2001, the first year to be examined as well as the first of five consecutive years of record sales.
It is not entirely clear whether the jump in contracts will result in improved November and December sales figures. Interest rates are creeping up again.
L.A. Times staff writer E. Scott Reckard reports:
Freddie Mac said Thursday lenders were offering 30-year fixed mortgages at an average 4.46% this week to well-qualified borrowers who paid 0.8% of the loan amount in upfront fees. The survey bottomed out last month at 4.17%. Last week it stood at 4.40%. (See link to Reckard's post below.)
If rates continue to rise it could complicate the closing of some of those October deals as consumers find themselves faced with larger mortgage payments than they had bargained for.
-- Alejandro Lazo
Photo: Real estate agent Sheila Gallagher, center, stands in the living room of a Alameda house she sold to Brad Hange, at left, with his daughter Abby. Credit: Marcio Jose Sanchez / Associated Press