WASHINGTON -- Americans signed fewer contracts to purchase homes in October as would-be buyers struggled to find available properties.
The National Association of Realtors said Wednesday that its pending home sales index, which measures the number of purchase contracts signed, fell 1.7% last month. The signed contracts become final purchases one to two months later.
Still, declining mortgage rates over time have lifted home sales. The index is up 4.4% from a year ago.
Mortgage rates have fallen sharply in the past year, partly because the Federal Reserve has lowered its benchmark short-term interest rate. That has partially offset steady increases in average home prices across the nation.
With companies hiring at a solid pace and wages rising modestly, Americans' finances are generally improving, enabling more people to buy. Sales of existing homes increased 4.6% in October compared with a year ago, while new-home sales have soared by more than 30%.
But Americans who want to buy a home have fewer choices. The number of available houses fell to 1.8 million in October, a record low for that month.
Pending home sales rose in the Northeast and fell in the South, Midwest and West.
Mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp., said Wednesday that the average rate on a fixed 30-year mortgage ticked up to 3.68% from 3.66% the previous week. The average 15-year mortgage was unchanged at 3.15%.
The drop in borrowing costs in the past year has helped lift home sales and construction. The 30-year rate was 4.8% at the same time last year, while the 15-year rate was 4.25%.
Freddie Mac surveys lenders across the country between Monday and Wednesday each week to compile its mortgage rate figures.
"Mortgage rates held mostly steady in the lead-up to the long Thanksgiving weekend," said Matthew Speakman, a Zillow economist. "Rates have spent the better part of November retreating from October's increases. While they remain above September's 2019 lows, rates have not returned to the 4% range last seen in the spring, which appeared likely just a few weeks ago. Doubts surrounding the U.S.-China trade talks are keeping rates in check for now, despite both sides expressing some optimism in recent days."
Lower mortgage rates are not the only thing lifting the housing market. The latest economic data has also buoyed it. Housing starts were up nearly 4% in October, which is the second-best showing since May 2018. Permits were up more than 5%.
Although homebuilder sentiment ticked down a bit this month, it was still the second-best showing of the year. An increase in the number of homes is expected next year, which could alleviate the supply problem in the market.
"The continued growth in single-family homebuilding, and permits for future construction, should make consumers who are considering buying confident that they will have a solid choice of homes," said Bill Banfield, Quicken Loans executive vice president of capital markets. "This is an important report for future homebuyers since one of the largest deterrents to entering the market right now is the lack of robust housing options."
Meanwhile, refinances pushed mortgage applications higher. According to the latest data from the Mortgage Bankers Association, the market composite index -- a measure of total loan application volume -- increased 1.5% from a week earlier. The refinance index rose 4%, while the purchase index edged down 1%.
The refinance share of mortgage activity accounted for 62% of all applications.
Information for this article was contributed by Christopher Rugaber of The Associated Press and by Kathy Orton of The Washington Post.
Business on 11/28/2019
Print Headline: Index of pending home sales declines 1.7% in October