More homebuyers signed purchase contracts in October compared to September, pushing up a monthly index of pending home sales, according to a report from the National Association of Realtors.
Pending sales of existing homes rose 10.4 percent month-to-month in October, to 89.3. An index score of 100 is the average level of contract activity in 2001, the first year that index data was collected and a record year for existing-home sales.
"It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011," said Lawrence Yun, NAR’s chief economist, in a statement.
On a year-over-year basis, the index is down 20.5 percent from October 2009 when the original deadline of the first-time homebuyer tax credit helped push the index up to its highest level since May 2006.
"A return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low-risk borrowers is needed," Yun said.
Default rates on Fannie Mae and Freddie Mac loans have been very low, NAR said, "much lower than the vintages of 2002 and 2003 before the housing boom."
All regions except the West saw month-to-month increases in pending home sales. The index dipped 0.4 percent in the West, to 104.3. The region also saw the smallest year-over-year decrease, however: 15.6 percent.
The Midwest saw the biggest month-to-month increase, 27.3 percent, to 81.7. Year-over-year, the region saw the second biggest drop: 24.8 percent. The index rose 19.6 percent from September in the Northeast, to 71.3. The region saw the largest year-over-year drop: 27.3 percent. The South experienced a 7.1 percent month-to-month index jump. Year-over-year, the index fell 18.4 percent in the region.
In its latest economic outlook, NAR upwardly adjusted the forecast for an expected drop in existing-home sales in 2010 to 6.4 percent. The association expects sales to rise 6.2 percent in 2011 and 2.7 percent in 2012. The 2012 projection fell from 4.7 percent in last month’s outlook.
NAR expects new single-family home sales to fall 15.9 percent this year and then rise again substantially in 2011 and 2012: 20.8 percent and 30.9 percent, respectively.
The association revised its latest projections for median existing-home prices slightly downward. NAR forecasts a median $172,500 for 2010 (flat from 2009) with hardly an increase in 2011: $173,500. The forecast for 2012 is better, but not by much: $177,700.
NAR expects the median price for new homes to be $220,100 this year, rising to $223,000 in 2011 and $230,700 in 2012.
Projections for the unemployment rate in the next two years remain above 9 percent: 9.5 percent in 2011 and 9.2 percent in 2012.