WASHINGTON -- An index measuring the number of Americans who signed contracts to buy homes in October jumped to nearly its highest level in almost six years. Steady job gains and record-low mortgage rates have made homebuying more attractive.
The National Association of Realtors said Thursday that its seasonally adjusted pending home sales index rose 5.2 percent to 104.8 in October. Excluding a few months when the index spiked because of a homebuyer tax credit, that is the highest level since March 2007.
The increase points to healthy sales increases of previously occupied homes in the months ahead. There's generally a one- to two-month lag between a signed contract and a completed sale.
The rise in sales adds to evidence of a steady housing recovery. Builders are more confident in sales and are starting construction on more homes. Home prices are rising on a consistent basis, which encourages more potential buyers to come off the sidelines and purchase homes. And more people may put their homes on the market if they gain confidence that they can sell at a good price.
The report is "another indicator suggesting that the recovery in housing has broadened and has sustained momentum," Michael Gapen, an economist at Barclays Capital, said in a note to clients.
Signed contracts jumped 15.6 percent in the Midwest and rose 5.5 percent in the South. But they fell 1.1 percent in the West and dipped 0.1 percent in the Northeast.
Hurricane Sandy lowered pending sales in the Northeast, the Realtors' group said. The West was hurt by low inventories of available homes.
Mortgage rates remained near record lows this week. The average rate on the 30-year loan was 3.32 percent, mortgage buyer Freddie Mac said, just above 3.31 percent last week, which was the lowest on records dating to 1971.
10 Emptiest Urban Areas in America
Pending Home Sales Near 6-Year High
Vacancy rate: 5.8% Median price per square foot: $73 Unemployment: 11.5%
It's not surprising that Las Vegas, the poster child of the housing downturn, adds high vacancy rates to its litany of problems with overbuilding and high foreclosure rates. Between peak and trough, Las Vegas housing prices plummeted by 60.4 percent. This decline in home values in Las Vegas and other housing markets in the state have contributed to Nevada being the only state in the country where the total worth of homes is less than the total amount owed on these homes.
Vacancy rate: 6.1% Median price per square foot: $83 Unemployment: 9.1%
In October the vacancy rate in Palm Bay-Melbourne-Titusville climbed 8.3 percent from last year, the highest of all increases on this list. Homes in Palm Bay specifically are very cheap these days: The median sale price between August and October 2012 dropped by 2.6 percent from the previous year to only $76,000. In Palm Bay Colony, which, Trulia notes, is among the most-searched neighborhoods in that city, the current average listing price is just $58,704.
Vacancy rate: 6.2% Median price per square foot: $78 Unemployment: 6.5%
Unlike metropolitan areas in Florida and Nevada, the housing market crash was not nearly as bad in Ohio. In Cleveland, the price drop from peak to trough was 17.6 percent, a far more modest decline compared to cities such as Las Vegas. Despite faring better than many markets, Cleveland is not yet showing many signs of turning a corner. On top of high vacancy rates, the average price per square foot is unchanged on a year-over-year basis, and the number of sales have dropped by nearly 20 percent in the same period. Further, while 1,754 resale and new homes are for sale in Cleveland, as per Trulia’s site, another 5,451 homes are in some phase of the foreclosure process.
Vacancy rate: 6.5% (tied for 4th highest) Median price per square foot: $69 Unemployment: 7.2%
There are some encouraging signs in the Toledo housing market despite its high vacancy rate. The median price per square foot is up about 60 percent on a year-over-year basis, according to Trulia. Another measure, however, points to an inventory problem: For each new or resale home listed on Trulia, there are two homes in the foreclosure pipeline that are either vacant or will enter the market at some point. The peak-to-trough price decline of 18.2 percent remains a challenge in a market that saw just a 4.6 percent price increase on a year-over-year basis.
Vacancy rate: 6.6% (tied for 4th highest) Median price per square foot: $72 Unemployment: 6.9%
If Dayton is starting to blossom into a rosier housing market, it is not yet evident in the area’s housing statistics. In addition to high vacancy rates, the data show a decrease in housing prices per square foot on a year-over-year basis along with a drop in the median sales price. Sales volume in the city climbed just 2.6 percent in the same period. The 11.8 percent peak-to-trough drop in the area was not the worst in Ohio, but that is not much to cheer about. Still, for homebuyers, a median sale price of $73,658 must have a certain appeal.
Vacancy rate: 6.6% (tied for 4th highest) Median price per square foot: $85 Unemployment: 8.8% (Michigan City-LaPorte, Ind.)
Of all metropolitan areas on this list, Gary’s was hit the least by the housing downturn. Home prices fell just 10.2 percent between the market’s peak and its trough. Although prices did not drop massively during the downturn, the asking price in Gary fell 3.5 percent from the previous year, worse than all but two metro areas. The average listing price in Gary is just $59,939. There's something else hurting a recovery in Gary: It's become something of a ghost town.
Vacancy rate: 6.6% (tied for 4th highest) Median price per square foot: $115 Unemployment: 8.4%
While about seven in 10 markets Trulia analyzed showed increases in vacancy rates, the vacancy rate in Fort Lauderdale actually decreased by almost 1 percent, indicating a strengthening housing market. And although the 4.4 percent increase in asking price is far from the strongest growth of all the metro areas measured, it is among the top third. One concern is that the average price per square foot has dropped 59.3 percent on a year-over-year basis.
Vacancy rate: 6.7% Median price per square foot: $109 Unemployment: 8.4% (Miami-Fort Lauderdale, Fla.)
Like most markets in Florida, the West Palm Beach market took a major hit during the housing downturn, falling 48.4 percent during the recession. Fortunately, recovery is taking hold. The average asking price in the area is up 11.3 percent, compared to the same period a year earlier, the fifth-largest increase of all metro areas measured. Also, the average price per square foot is up an impressive 63.7 percent compared to a year ago.
Vacancy rate: 6.9% Median price per square foot: $92 Unemployment: 7.0%
Similar to markets in Nevada and Florida, the Tucson area was hit very hard by the housing downturn. Housing prices fell 37.3 percent between its peak and trough. While asking prices grew 8.1 percent year-over-year, the growth in listing price is not nearly as strong as in neighboring Phoenix, which grew by almost 25 percent in the same period. Still, the average price per square foot in Tucson is up a healthy 56.6 percent on a year-over-year basis, suggesting that the market is bouncing back.
Vacancy rate: 12.3% Median price per square foot: $47 Unemployment: 10%
Detroit’s housing market has taken a larger hit than most in recent years due to problems in the automobile industry. Between its highest and lowest point, home prices dropped 39 percent. The median price per square foot of just $47 is the lowest out of all 100 metropolitan areas measured. For every new or resale home listing on Trulia, nearly another three are in some phase of the foreclosure process. A troubling thought for anyone contemplating selling a home in this oversaturated market is that, despite low home prices (the average listing is under $48,000), the number of sales has actually decreased by more than 27 percent on a year-over-year basis.
A big reason for the rebound in housing is that the excess supply of homes that built up before the housing crisis has finally thinned out. The number of previously occupied homes available for sale has fallen to a 10-year low. The inventory of new homes is also near the lowest level since 1963.
At the same time, more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.
Those trends are also pushing up home sales and construction. Sales of previously occupied homes are near five-year highs, excluding temporary spikes in 2009 and 2010 when a homebuyer tax credit boosted purchases.
Builders, meanwhile, are more optimistic that the recovery will endure. A measure of their confidence rose to the highest level in six and a half years this month. And builders broke ground on new homes and apartments at the fastest pace in more than four years last month.
Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.