Unexpected Results in Home Sales

New home sales slightly up, while pending home sales are slightly down

The annual pace of new home sales increased a bit more than expected in September, rising 5.7 percent from the previous month. At the same time, although economists had forecast a 0.4 percent gain, contracts for pending home sales declined in September by 4.6 percent.

First time buyers are behind the slight rise in new home sales, as evidenced by the proportion of lower-priced, entry-level homes under contract. Bob Nielsen, chairman of the National Association of Home Builders (NAHB), notes “these consumers are very dependent upon federal policies and programs that support homeownership, such as the mortgage interest deduction and low-down payment mortgage options.”

The number of home buyers able to take advantage of historic low mortgage rates and pricing on existing homes is limited by the combination of low consumer confidence, high unemployment and limited access to credit. Nonetheless, although pending home sales declined from the previous month in the largest month-to-month change since April of this year, the National Association of Realtors (NAR) monthly index shows a year-over-year increase of 6.4 percent.

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