Pending sales of U.S. existing homes a record increase of 10%

More Americans unexpectedly signed contracts to buy existing homes in October, easing concern that the lack of government support is to destabilize the housing market.

The rate of home sales rose in anticipation of a record 10 percent after falling 1.8 percent in September, the National Association of Realtors said today in Washington. The median forecast in a survey called for a decline of 1 percent. The group's data back to 2001.

Low borrowing costs and lower prices may attract some buyers, helping the house to regain its footing after the end of a tax credit demand caused the depression. Even so, increased foreclosures and unemployment near 10 percent indicate that the industry in the middle of the last downturn will take years to recover.

"The fundamentals that are driving home sales are low mortgage rates combined with job growth and income and that is why housing is expected to grow in the coming months," said Dean Maki, chief economist at Barclays Capital Inc. in New York. "Housing activity will be still low compared to the boom years, but expect a solid growth rate to occur."

The shares added that early gains after the report. 500 of Standard & Poor's rose 0.7 percent to 1,214.57 at 10:21 am in New York. Treasuries fell, bringing the yield on the benchmark 10-year up 3 percent from 2.97 percent yesterday afternoon.

Downward trend

Another report today showed that fewer Americans filed claims for unemployment insurance payments last month, showing the labor market is starting to improve.

The number of jobless claims averaged 431,000 a week during the months ended November 27, the lowest level since August 2008, showed Labor Department figures. Claims rose by 26,000 last week, more than expected, to 436,000, after reaching a minimum of two years.

"Under minimum and maximum prices set a downward trend, and that's what finally seems to be emerging," said Ian Shepherdson, chief U.S. economist LLC High Frequency Economics in Valhalla, New York, in a note to clients. "If it continues, we should expect to see better numbers from the payroll over the next few months."

One morning the Labor Department report may show employers added 145,000 workers last month and the unemployment rate remained at 9.6 percent.

Windfall

The projected reduction in pending home sales is based on the median of 40 forecasts in a survey. Estimates ranged from a decline of 4.8 percent, a gain of 3 percent.

Three of the four regions saw an increase, today's report showed. That included gains of 27 percent in the Midwest, 20 percent in the Northeast and 7.1 percent in the South. Purchases fell 0.4 percent in the West.

"The housing market is clearly in a recovery phase and irregular, at times, but the job market improves and as a result of increased household formation will help the recovery process is going in 2011," said Lawrence Yun, chief economist NAR said in a statement. "But the activity must continue to improve to achieve healthy and sustainable levels."

Compared with October 2009 sales, pending decreased 22 percent.

Fed watch

Housing is a major concern for those responsible for the Federal Reserve, which last month announced additional purchases of assets to boost growth and reduce unemployment. Its Beige Book, released yesterday, showed the economy strengthened in much of the U.S. the hiring of the improvement, expansion of manufacturing and retailers anticipated a holiday shopping season stronger.

"Housing markets remain low, with several districts reporting further weakening during the past six weeks," the Fed said in the report, based on anecdotal information.

pending home sales is considered a leading indicator, as the track contract signings. Purchases of existing homes are tabulated when a contract closes, usually one or two months later.

Sales of existing homes, which now represent about 90 percent of the market, fell more than expected in October as foreclosure moratoriums and the lack of credit, market-data group of Realtors showed the week pass. In July, sales ran at the weakest pace on records going back a decade.

The tax credit worth as much as $ 8,000 necessary contracts were signed on April 30 and closes on 30 September. Many of the closures occurred in May and June, because the original incentive to call for the operation was completed on 30 June.

Companies like Beazer Homes USA Inc., which builds homes for first time buyers, are cautious about next year.

"Sustained high levels of unemployment and excess of foreclosures make it very difficult to predict when and to what extent the housing market will recover," said Ian McCarthy, CEO of Atlanta-based Beazer said in a conference call with analysts November 5.