Pending home sales rise in August
More buyers are drawn to market by low-priced foreclosure properties
More Americans than forecast signed contracts to purchase previously owned homes in August, a gain that may be wiped away by the worsening credit crunch.
The index of pending home resales rose 7.4 percent, the most since October 2001, after falling 2.7 percent in July, the National Association of Realtors said yesterday in Washington. The increase came as surging foreclosures pushed down prices to lure some buyers to the market.
Purchases may resume their decline in subsequent months; Federal Reserve chairman Ben S. Bernanke Tuesday said that "even households with good credit histories are now facing difficulties obtaining mortgage loans." The financial crisis spurred the Fed to cut interest rates by half a point in an action coordinated with five other central banks.
"Vulture investors buying foreclosed homes are likely the key driver of the rise" in August, said Ian Shepherdson, chief US economist at High Frequency Economics Ltd. in Valhalla, N.Y., who forecast a 4 percent increase. "The key test now is what happens in September and October."
"This certainly isn't something that the market is focusing on," said Lindsey Piegza, a market analyst at FTN Financial in New York. "We've had a tremendous array of economic reports that have kind of pinned down some of the underlying fundamentals in the economy, and the market has not been reacting to them."
Some pending sales may not close because banks are reluctant to lend as property values keep sinking and foreclosures mount.
Economists projected the home-sales index would fall 1.3 percent, according to the median of 38 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.2 percent to a 4 percent gain.
Pending resales were up 8.8 percent from August 2007.
All four regions saw pending sales increase from July. The West, an area where foreclosures are particularly prevalent, saw the biggest rise in pending sales with an 18.4 percent jump. Resales climbed 8.4 percent in the Northeast, 3.6 percent in the Midwest, and 2.3 percent in the South.
Compared with a year ago, pending resales were up in all regions except the South.
"What we're seeing is the momentum of people taking advantage of low home prices, with pending-home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island,, and the Washington, D.C., region," Lawrence Yun, the group's chief economist, said in a statement. "We're hopeful most of the increase will translate into closed existing-home sales."
Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in a separate report. 