Contracts to purchase previously owned homes unexpectedly dropped in October as tighter credit and weak wage gains held back would-be buyers.
The pending home sales index declined 1.1% after a 0.6% increase in September that was larger than initially reported, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for the index to rise 0.5%, with estimates ranging from a decline of 1.3% to an advance of 2%.
“Demand is holding steady but would be more robust if it weren’t for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents,” NAR chief economist Lawrence Yun said in a statement.
Purchase contracts rose 2.2% in the 12 months ending in October after a 3.4% annual increase in September that was larger than previously estimated, the NAR report showed. The two months of year-over-year advances follow an 11-month streak of declines.
The pending sales index was 104.1 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 fell in three of four regions, declining 3.2% in the West, 1% in the South and 0.6% in the Midwest. Purchase contracts rose 0.5% in the Northeast.
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 resales unexpectedly rose last month to a 5.26 million annual pace, the strongest since September 2013 and up 1.5% from a revised 5.18 million pace in September, NAR data showed last week.
Building permits for future projects reached a six-year high in October, signaling construction will add to U.S. growth in early 2015, Commerce Department figures showed last week.