Rise in Pending Sales of Existing Homes Gives Hope

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Real Estate

There was a surge in the number of buyers who signed contracts to purchase existing homes in the U.S. in October compared to the previous month. This has given hope to a lot of people whose careers, livelihoods, investments and assets lie in the real estate sector. This means that homeownership is still a most pursued dream for many Americans amid financial difficulties.

Based on a report released by the National Association of Realtors, its index of pending sales of pre-owned homes increased by 10.4 percent in October to 89.3, up from 80.9 in September. Although the October  index was way below the October index of 112.4 last year, the September to October increase was double-digit – a positive and significant change at a time when home sales and prices were falling down in many areas.

Besides, the increase in pending home sales in October last year was largely due to the efforts of first-time homebuyers to take advantage of the tax credit program before it expired in November last year.

The biggest surge in the October pending home sales index was in the Midwest where it shot up by 27.3 percent to 81.7. Second was the Northeast, where the index rose by 19.6 percent to 71.3, and third was the South, where the index rose by 7.1 percent to 93.8.
It was in the West where the index fell by 0.4 percent to 104.3. The West, however, still had the highest index during the month. In all the regions, the index fell compared to 2009 levels.

An existing home sale is considered a pending existing home sale when the sales contract has been signed but the deal has not closed. After one or two months and the transaction would be closed, the sale would then be counted as an existing home sale. The index of 100 is assigned when pending existing home sales equal the average number of sales contracts in 2001, the year pending existing home sales were first collated and analyzed.

According to NAR, the major factor for the increase was still the high affordability of homes. Certainly, the lower mortgage rates and the high levels of inventory also helped encourage buyers to act on their home ownership dreams.

Sales of existing homes fell in October, but the decrease rate was not sharp. The adjusted annual rate of home sales in October was 4.43 million units, a drop of 2.2 percent from the adjusted September total of 4.53 million units.

With the drop in existing home sales in October, the surge in pending existing home sales during the month is a bright ray of sunshine in a struggling sector.