US pending home sales tumble 4.9%

Orders for durable goods rise 2.4%

WASHINGTON, Jan 29, (AP): Americans pulled back substantially on signing contracts to buy homes in December, a possible sign of mounting affordability challenges as prices are rising faster than incomes.

The National Association of Realtors said Wednesday that its pending home sales index, which measures the numbers of purchase contracts signed, plunged 4.9% last month to 103.2. Still, lower mortgage rates mean that contract signings were up 4.6% from December 2018.

The average rate on a 30-year mortgage was 3.65% last week, down from 4.45% a year ago, according to mortgage buyer Freddie Mac. Cheaper borrowing costs helped boost demand for housing last year, but it also led to higher prices by the end of 2019 that could weigh on affordability going forward.

Contract signings fell last month in the Northeast, Midwest, South and West.

Meanwhile, orders to US factories for big-ticket manufactured goods rose in December as a big jump in demand for military aircraft offset a sharp decline in commercial aircraft that reflected Boeing’s continued problems with its 737 Max. A key category that tracks business investment fell by the largest amount in eight months.

The Commerce Department said Tuesday orders for durable goods rose 2.4% in December, the strongest showing since August. However, excluding defense, new orders would have fallen 2.5%.

The category that tracks business investment plans dropped 0.9%, the biggest decline since a 1.1% setback in April.

Business investment has been hurt over the past year by uncertainties generated by President Donald Trump’s trade war with China. Now that agreement has been reached on a Phase One deal, there is hope that a more stable outlook on trade will convince businesses to start investing again to expand and modernize their operations.

Demand for commercial aircraft fell a sharp 74.7%, reflecting the struggles Boeing has had with its troubled 737 Max plane following two fatal crashes.

Economists believe Boeing’s difficulties could trim overall economy growth by as much as one-half percentage point in the current JanuaryMarch quarter.

The commercial aircraft drop was offset by a 168.3% surge in demand for military planes.