US pending home sales edge up in October
Fed moves to bar bailouts of failing firms
WASHINGTON: Slightly more Americans signed contracts to buy homes in October, a modest rebound after two prior monthly declines. The figures add to evidence that the housing market has lost some of its momentum after rapid sales growth earlier this year.
The National Association of Realtors said yesterday that its seasonally adjusted pending home sales index rose 0.2 percent to 107.7 last month. The index has increased 3.9 percent over the past 12 months. “The data suggest that growth in home sales has slowed significantly,” said Jim O’Sullivan, chief US economist at High Frequency Economics.
O’Sullivan added, though, that because the reports are so volatile, it may be early to jump to broader conclusions. Healthy job gains and low mortgage rates boosted sales for much of the year. But rising home values and limited inventories have limited further growth in the closing months of 2015.
The Realtors reported last week that finalized sales have risen 3.9 percent from a year ago, even as buyers have fewer choices because the number of listings on the market has dropped 4.5 percent. A narrow selection of homes on the market has pushed up sales prices 5.8 percent from a year ago to a median of $219,600.
Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale. The housing market had benefited from hiring that has cut unemployment to 5 percent, down from 5.7 percent a year ago. Average hourly earnings have improved 2.5 percent over the past year that slight increase enhanced by low inflation. But wage growth has failed to match the rise in home values, forcing more would-be homebuyers to wait and save for a down payment.
Also aiding sales have been lower borrowing rates. Mortgage rates remain well below their historic average of 6 percent. The average, 30-year fixed mortgage rate was 3.95 percent last week, according to mortgage buyer Freddie Mac. But the market is still recovering more than six years after the end of the Great Recession. Home sales have been uneven in different geographic regions. The number of signed contracts advanced in the Northeast and West, while dipping in the Midwest and South.
Fed moves
Federal Reserve officials have moved to prevent the central bank from bailing out failing companies, a power it exercised during the 2008 financial crisis. The Fed governors voted 5-0 yesterday at a public meeting to downsize the Fed’s emergency lending powers.
Only broad lending programs designed to revive frozen markets - not loans to individual firms - will be allowed. The Fed spent about $2 trillion on such a program to ease a credit crunch during the financial meltdown, aiming to spark lending to consumers and small businesses. The 2010 law enacted by Congress overhauling financial regulation required the Fed to impose the restraints.—Agencies