Pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October, indicating the industry at the center of the last recession is stabilizing as the job market improves.
The increase in the number of Americans signing contracts to buy homes followed another report showing claims for jobless benefits over the past month on average dropped to a two-year low.
Combined with figures showing chain-store sales topped estimates last month, the reports added to evidence the world’s largest economy is strengthening, sending stocks up for a second day. Cheaper borrowing costs, lower prices and more jobs may entice homebuyers in coming months, helping the real-estate market regain its footing after the end of a tax credit caused demand to slump.
“The fundamentals that are driving home sales are low mortgage rates combined with job and income growth and that’s why housing should be expected to grow in coming months,” said Dean Maki, chief economist at Barclays Capital Inc. in New York. “Housing activity will still look low relative to the boom years, but we expect a solid growth rate to occur.”
The Standard & Poor’s 500 Index rose 1.3 percent to 1,221.53 at the 4 p.m. close in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 3 percent from 2.97 percent late yesterday.
Unemployment Claims Slowing
The number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. “The labor market is definitely improving,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Overall, the economy seems to be outperforming expectations this quarter, which is encouraging because it gives us positive momentum into next year.”
“The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011,” Lawrence Yun, NAR’s chief economist, said in a statement. “But activity needs to improve further to reach healthy, sustainable levels.”
The Fed’s report, released yesterday, showed the economy strengthened across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.
The average interest rate on a fixed 30-year mortgage reached 4.17 percent in mid November, the lowest level since Freddie Mac records going back to 1972.
Pending Sales is a Leading Indicator
Pending home sales are considered a leading indicator because they track contract signings. Purchases of previously owned homes are tabulated when a contract closes, typically a month or two later. These unexpected high pending homes sales numbers could surely be a sign that the housing market is finally on the road to recovery.
Bloomberg, By Courtney Schlisserman and Timothy R. Homan - Dec 2, 2010
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