WASHINGTON (11/26/13)--A key measure of future home sales fell for the fifth month in a row in October, dropping to its lowest level since December 2012.
The National Association of Realtors announced Monday that its Pending Home Sales Index fell by 0.6% last month to 102.1. The report also found that purchases fell on an annual basis in October by 2.2%, with the index declining by 1.6% since October 2012.
The measure fell by 4.6% in September, despite being revised upward to 102.7 from 101.6.
The monthly decline defied many analysts' expectations. Economists polled by Bloomberg predicted a 1% gain in the gauge (Bloomberg.com Nov. 25). Moody's analysts predicted that the NAR index would increase by 1.1% (Economy.com Nov. 25).
A number of factors help explain the decline. Higher mortgage rates and price increases driven by a declining supply of homes on the market underpin the decrease in pending purchases. Analysts at Bloomberg also said that a more robust labor market would lead to more home sales, and Moody's analysts said that the federal government shutdown and uncertainty over a lasting congressional agreement on fiscal issues have eroded consumer confidence.
Activity in the housing market has a ripple effect in the economy, moving the bottom lines of firms making durable consumer goods and housing accessories.
The NAR Pending Home Sales index typically predicts changes in home sales one to two months in advance. A score of 100 corresponds to the average level of home sales in 2001.