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.
NEW YORK (11/26/13)--Home prices crept up by 0.2% in September, according to the LPS Home Price Index.
The index also increased by 8.2% on an annual basis in September, reflecting a 9% increase in home prices. The average unadjusted home price was $231,720.
The monthly change represents a months-long cooling of the housing market that is expected to continue. From the start of the year until August, the seasonally adjusted LPS Home Price Index increased by about 0.8% every month. It grew at 0.5% from August to September.
A preliminary incomplete data set shows that home prices will increase on a seasonally adjusted monthly basis by 0.4% in October (Economy.com Nov. 25). A key predictor of pending home sales--tabulated by the National Association of Retailers--forecast Monday a decrease for the fifth consecutive month (Market News Nov. 26). Higher mortgage rates, weak wage growth and low consumer confidence are all weighing down demand, said analysts.
Price fluctuations in different states varied little in September, with the biggest drop, at 0.9%, occurring in Connecticut, and the biggest rise, at 0.8%, occurring in Nevada (TheStreet.com Nov. 25).
The annual increase in home value was fairly consistent over a range of home prices, with growth marginally stronger in the middle of the distribution.
The LPS index comes out every month. It takes into account home prices based on transactions, and adjusts for prices of homes involved in distress sales.