Pending US home sales post biggest annual increase since 2015

Washington

CONTRACT signings to purchase previously owned US homes posted the largest annual increase in four years, signalling lower mortgage rates are reviving interest from buyers.

The National Association of Realtors' (NAR) latest index of pending home sales increased 6.3 per cent in September from a year earlier on an unadjusted basis.

This is the biggest gain since August 2015, according to data released on Tuesday. On a monthly adjusted basis, contracts rose 1.5 per cent, exceeding the median forecast in Bloomberg's survey for a gain of 0.9 per cent.

The result indicates the housing market is regaining traction after a separate report showed contract closings fell 2.2 per cent in September.

A decline in mortgage rates - helped by US Federal Reserve interest-rate reductions - probably helped return residential investment to growth in the third quarter for the first time in more than a year, though housing is still relatively subdued compared with previous expansions.

At the same time, with mortgage costs well below levels from earlier this year and unemployment at a half-century low, the door remains open for further growth.

A separate report on Tuesday showed home prices in 20 US cities declined in August from the prior month for the first time in a year, reflecting moderation in some once-hot real estate markets.

Pending home sales are often considered a leading indicator of existing-home purchases and a measure of the health of the residential real estate market in coming months.

"Even though home prices are rising faster than income, national buying power has increased" with lower interest rates, Lawrence Yun, NAR's chief economist, said in a statement. "But home prices are rising too fast because of insufficient inventory." BLOOMBERG