The National Association of Realtors (NAR) Pending Home Sales Index increased 10.4 percent in October to reach 93.3, placing it 9.2 percent higher year-over-year.
Of the nation's four regions, only the West experienced a drop in pending home sales in October, and that decrease was only 0.3 percent. Despite that dip, sales remained 8.1 percent higher year-over-year. Sales in the Northeast were only 3.4 percent higher than October 2010, reaching an index of 71.3, but that represents a 17.7 percent increase from the previous month. The South and Midwest experienced pending home sales increases of 8.6 and 24.1 percent, respectively, rising to 9.7 and 13.2 percent above their levels from October 2010.
"Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years," said NAR chief economist Lawrence Yun. "We hope this is indicates more buyers are taking advantage of the excellent affordability conditions."
Yun noted that not all contracts are leading to closings, with significant numbers of prospective home buyers unintentionally damaging their credit ratings by making changes during the approval process. Cancelling old lines of credit and seeking new ones at that point is poor timing, and has resulted in some applications being denied and others ending in less favorable mortgage terms than would have been possible otherwise.
According to the NAR, the surge in pending sales is partially a result of buyers realizing that home purchase loans in the past two years have had very low levels of default, and falling inventory is beginning to reassure some about the market as a whole, calming consumer fears.
Bloomberg noted the increase in pending home sales exceeded expectations, citing a survey which resulted in economists predicting a 2 percent increase rather than the 10.4 percent growth that actually occurred. Estimates that went into the survey ranged from a 5.6 percent increase to a 2 percent decrease. Coupled with recent NAR reports that existing-home sales rose in October, this appears to some experts to be a sign that the real estate market is preparing to turn in a more positive direction.