Pending home sales hit 10-month low, services sector rebounds

(Reuters) – Contracts to buy previously owned U.S. homes hit a 10-month low in October, but a strong rebound in services sector activity early this month suggested some resilience in the economy as the year winds down.

The National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed last month, slipped 0.6 percent to 102.1, the lowest level since December.

It was the fifth straight month of declines in contracts and suggested home resales could remain on the back foot for the rest of this year. These contracts become sales after a month or two. Home resales fell in October for a second straight month.

“The data suggest sluggish home sales going into the end of the year and that the tightening of financial conditions this summer did have a negative impact,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

Economists, who had expected pending home sales to rise 1.3 percent in October, said the weak home sales trajectory could see the Federal Reserve sticking to its $85 billion monthly bond buying program at least until early next year.

The U.S. central bank has targeted housing as a channel to boost growth and speed up job creation.

The Realtors group said October’s 16-day partial shutdown of the federal government had sidelined potential buyers.

According to the NAR, a survey of realtors found 17 percent of respondents reported delays in signing contracts because they had to wait for the Internal Revenue Service to verify income before the mortgage could be approved.

The Realtors group expected a bounce back in contracts, but it cautioned that lack of inventory remained a constraint.

(Reporting by Lucia Mutikani Additional reporting by Ryan Vlastelica in New York; Editing by Andrea Ricci)

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