–Not All Contract Signings Are Leading to Closings
By Ian McKendry
WASHINGTON (MNI) – Contracts signed to purchase an existing-home
increased 10.4% in October the National Association of Realtors reported
Wednesday.
The NAR’s pending home sales report is usually a good indicator of
sales figures one to two months down the road. However of late, NAR
membership has reported a significant number of contract cancellations
before deals are being closed.
“Although contract signings are up, not all contracts lead to
closings,” NAR Chief Economist Lawrence Yun said in a statement
Wednesday.
Last Monday, when the NAR reported existing-home sales for October,
Yun said “a higher rate of contract failures has held back a sales
recovery,” adding “contract failures reported by NAR members jumped to
33% in October from 18% in September, and were only 8% a year ago, so
we should be seeing stronger sales.”
Yun said many potential home buyers are struggling to get a
mortgage because of conservative lending standards and that many buyers
have inadvertently hut their credit scores.
Despite the elevated number of contract cancellations, Yun said the
uptick in signed contracts is encouraging and that “many consumers are
recognizing that home buyers in the past two years have had one of the
lowest default rates in history.”
“The PHSI in the Northeast surged 17.7 percent to 71.3 in October
and is 3.4 percent above October 2010. In the Midwest the index jumped
24.1 percent to 88.7 in October and remains 13.2 percent above a year
ago. Pending home sales in the South rose 8.6 percent in October to an
index of 99.5 and are 9.7 percent higher than October 2010. In the West
the index slipped 0.3 percent to 105.5 in October but is 8.1 percent
above a year ago,” The NAR said.
“We hope this is indicates more buyers are taking advantage of the
excellent affordability conditions,” Yun said referencing the stronger
October pending home sales number.
** Market News International Washington Bureau: 202-371-2121 **
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