Driven by all-time record low mortgage rates, pending home sales surged in October as home buyers sought to take advantage of low interest rates before they rose, according to the National Association of Realtors monthly report. Pending sales, which are usually scheduled to close within a month or two and are still contingent upon inspections and mortgage financing, are especially hard-pressed in the current economy with restrictive mortgage lending.
The pending home sales index rose 10.4% during the month to 89.3% based upon contracts signed in October. Lower home prices coupled with near record low mortgage rates are driving home buyers to look for property. “It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels,” said Lawrence Yun , NAR chief economist. ”The housing market clearly is in a recovery phase and will be uneven at times.”
Rigid mortgage under-writing standards, however, are restraining the housing market from fully recovering as lenders raise the FICO scores needed to qualify for a mortgage. “A return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery,” Yun said.
Existing home sales that went pending surged 27.3% in the Midwest region of the country to rack up the highest increase. Sales rose 19.6% during the month in the Northeast, but only rose 7.1% in the South where sales have been off for two straight months as the economy struggles to recover with high foreclosures, especially in Florida.
However, home sales declined in the Western region of the nation, including California, where sales ran out of gas and home prices are again declining in the majority of markets. Pending sales slipped 0.4% in the West and are 15.6% below a year ago.
Most housing analysts expect home sales to increase during the spring and summer months driven by low mortgage rates and lower home asking prices. High unemployment in most of the country, topping 20% in some areas and business resistance to hiring back more workers is leading to the slowdown in a housing market recovery in most of the U.S. Corporations reported the highest profits in decades in the last quarter, but mainly because employers have slashed jobs.