Vital Signs: Pending Home Sales Take a Quick Turn South

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Fewer homebuyers are signing on the dotted line. The pending home sales index, compiled by the National Association of Realtors, declined for fifth consecutive month in October, to stand at its lowest reading since December 2012.

The pending sales index captures contracts signed to buy a home. When the contracts are closed, the numbers show up as existing home sales. The dropoff in home demand has been quick. In June, pending home sales were up 11% from their year-ago levels. By October pending sales were down 1.6% on a year-over-year basis.

The NAR says the government shutdown may have delayed some home buying in October but the trade group expects pending sales to level off.

“We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors,” says Lawrence Yun, the NAR’s chief economist.

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