Contracts to purchase previously owned U.S. homes rose less than forecast in November, indicating higher borrowing costs are holding back the recovery in residential real estate.
A gauge of pending home sales increased 0.2%, the first gain in six months, after a 1.2% drop in October that was larger than initially reported, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1% advance.
Higher mortgage rates, tight lending standards and price increases driven by a limited supply of homes for sale are discouraging prospective buyers. Further gains in hiring, household wealth and consumer confidence would help boost the housing recovery and give greater momentum to the economy.
“The combination of bank reluctance to lend and the pop in mortgage rates did throw a monkey wrench in that sector,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “We’re looking for a solid spring season, but you may not see the big climbs in price until March, April and May.”
Estimates in the Bloomberg survey of 30 economists ranged from a decline of 1% to an advance of 5%.
Stocks remained lower after the figures, with the Standard & Poor’s 500 Index declining 0.1% to 1,840.25 at 10:04 a.m. in New York.
Purchases dropped 4% from the year prior on an unadjusted basis after a 2.7% decrease in the 12 months ended in October, the NAR reported.
The pending sales index was 101.7 on a seasonally-adjusted basis. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home- buying traffic, according to the Realtors group.
Two of four regions showed a decrease from October, with pending home sales in the Northeast dropping 2.7% and the Midwest falling 3.1%. Pending sales rose 2.3% in the South and 1.8% in the West.
Economists consider pending home sales a leading indicator because they track contract signings. Existing-home sales are tabulated when a contract closes, usually a month or two later.
The NAR projects 2013 will be the best year in seven for existing home sales, with an estimated 5.1 million transactions.