The month of October, a disaster for new home sellers, was apparently not as depressed in the existing home market, according to the National Association of Realtors Pending Home Sales Index.
The PHSI, based on contracts signed in October, declined only 0.7% to a reading of 88.9 from an upwardly revised 89.5 in September. Said the Realtor group: "Pending home sales eased against a deteriorating economic backdrop but remain in a stable range."
The NAR said conditions "remain uneven" from market to market but singled out several areas in Florida and California as well as Providence, R.I., Lansing, Mich., Oklahoma City, and Las Vegas as registering "healthy gains" in PHSI.
Regionally, the PHSI in the South rose 7.8% to 95.9 but remains 2.9% below a year ago. It was up 0.6% in the Northeast to 68.1, 14.1% below October 2007. The Midwest declined 4.3% to 79.7, 6.8% below a year ago. In the West, the index fell 8.7% to 103.7 but is 17.4 percent higher than October 2007.
Said Lawrence Yun, NAR chief economist, "Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range. We did see a spike in August when mortgage conditions temporarily improved, which underscores two things: there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market."
The NAR put out its revised economic and housing industry forecasts along with the PHSI. Using what it called "middle ground assumptions," the NAR projects existing-home sales of 4.96 million this year, 5.19 million in 2009 and 5.55 million in 2010. It put new-home sales for 2008 at 486,000, 393,000 in 2009 and 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.
Regarding home prices, Yun said, "The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration."
The NAR expects mortgage rates to average 5.6% in the first quarter, rise slowly to 6.0% by the end of 2009 and average 6.2% in 2010. Its affordability index is forecast to remain "favorable," averaging 138 in 2009.
Yun said he expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year, lifted by a home sales recovery. "Given the critical role of housing in an economic recovery, we're confident sufficient stimulus will be offered to bring more buyers to the market," he said.