The National Association of Realtors reports pending home sales fell by the most it has in more than three years in September, a sign that the economy is so weak it cannot tolerate a rise in mortgage rates. The report showed signed contracts to buy previously-owned homes fell 5.6 percent in September from the previous month – the biggest drop since May of 2010 – and widely missing expectations that contracts would actually rise 0.1%.
The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, plummeted 5.6 percent to 101.6, which is not the fourth monthly fall in a row. Economists polled by Reuters were ay off, as previously stated actually forecasting that there would be a slight increase.
Mortgage rates have risen a bit, but quickly, since May expectations that the U.S. Federal Reserve would start winding down quantitative easing, or the bod buying program that requires the Fed to print large amounts of money to secure government debt. Rates have eased slightly in recent weeks, keeping the money flowing toward equities.
Many investors believe the Fed will keep its bond buying stimulus intact given September data, which showed the U.S. economy is far weaker than previously thought. Last month, the U.S. economy created just over 140,000 jobs — most of which part-time — which is not even enough to keep pace with population.
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.