U.S. pending home sales surged a record 10.4% in October -- far above economists' estimates -- propelled higher by "excellent housing affordability," the National Association of Realtors (NAR) announced Thursday.
A Bloomberg survey had expected pending sales of homes to fall 1% in October after a 1.8% decline in September. Pending home sales -- transactions signed, but not yet closed -- are now 20.5% lower than a year ago, slightly better than the 24.9% year-over-year decline recorded in August. The NAR has been tracking pending home sales data since 2001.
October's surge occurred despite the fact that the closing deadline for the homebuyer credit expired on Sept. 30, 2010.
Pending sales rose in October in three of four U.S. regions, surging 19.6% in the Northeast, 27.3% in the Midwest, and 7.1% in the South. Sales dipped 0.4% in the West.
Many Factors Affecting Home Purchase Decision
Lawrence Yun, NAR chief economist, said multiple factors, including housing affordability and an improving U.S. job market, are helping the housing sector recover.
"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," Yun said, in a statement.
"More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery," Yun added.
In general, economists view new and existing home sales statistics as more-accurate indicators of housing sector activity than pending home sales, due to the number of pending home sales that fall through, as a result of mortgage problems, title issues, liens, and other complications that sometimes prevent signed housing contracts from being finalized.
U.S. Housing Sector: Better Days Ahead?
The October report shows a decided upturn in pending sales activity, which was probably also aided by lower home prices, in addition to the recent job market improvement and relatively low mortgage rates.
However, economists caution that it's only one month's data -- not nearly long enough to declare that an enduring housing sector rebound is underway. For that to occur, sustained, monthly job growth of better than 125,000-150,000 jobs per month would have to occur, and the U.S. economic recovery has not progressed to that level of growth yet.