Housing recovery takes another blow as pending home sales tumble

Jason LangeReuters

Contracts to purchase previously owned U.S. homes fell by the most in more than three years in September, a sign that a softer economy and a rise in mortgage rates are hurting the country’s housing market.

The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, plunged 5.6 percent to 101.6, the fourth monthly fall in a row. Economists polled by Reuters had forecast a slight increase.

Mortgage rates have risen sharply since May on bets that the U.S. Federal Reserve would soon begin winding down a stimulus program, although rates have eased slightly in recent weeks.

Many investors believe the Fed will keep its bond buying stimulus at full throttle given recent signs the U.S. economy lost a step in September.

The number of newly signed contracts to buy homes was at its lowest level last month since December. It was the largest one-month drop since May 2010, when a home-buying tax credit was expiring, an NAR spokesman said. Contracts fell across all four major regions tracked by the realtors’ group.

The U.S. housing market, which was battered by the 2007-09 recession, had appeared to turn a corner early last year when home prices began to rise again.