Pending Home Sales Rise As Buyers Grab Bargains

Pending sales of existing U.S. homes unexpectedly jumped in August to the highest level in over a year, data from a real estate trade group showed on Wednesday.

AP

The National Association of Realtors Pending Home Sales Index, based on contracts signed in June, rose 7.4 percent in August to 93.4 from an updwardly revised index of 87.0 in July.

The August reading was 8.8 percent higher than a year earlier, and the highest level since 101.4 in June 2007.

Economists polled by Reuters ahead of the report were expecting pending home sales to drop by 1.8 percent.

The association's senior economist Lawrence Yun said home buyers responded to improved affordability, with home prices low and mortgage rates down after the government takeover of Fannie Mae and Freddie Mac.

Meanwhile, applications for U.S. residential mortgages climbed last week from the lowest level in a month as home loan rates declined.

Lending conditions remained tight with global financial markets in chaos, crimping mortgage activity, analysts said.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.2 percent in the week ending Oct. 3 to 465.5 after falling 23 percent the prior week to the lowest level since the end of August.

Mortgage rates declined last week.

As investors rushed to the safety of U.S. Treasury securities, yields fell on the debt, which is used as a peg for home loan rates.

Fixed 30-year mortgage rates averaged 5.99 percent, down from 6.07 percent the prior week.

The MBA's seasonally adjusted index of applications for loan refinancings rose 0.9 percent last week to 1,345.8 after tumbling 34.7 percent a week earlier.

The gauge of loan requests for home purchases climbed 3.2 percent to 314.5 after dropping by 10.9 percent.

(Watch the accompanying video for more on pending home sales and what it means for the overall economy...)

Major U.S. stock indexes tumbled even after a $700 billion U.S. government rescue program was enacted on Friday and the Federal Reserve this week unveiled new steps to improve financial system liquidity.

The programs are intended to boost confidence and the willingness of financial institutions to lend.

Unemployment is at a five-year high and expected to keep rising, meantime, which could dampen demand for home purchases, analysts said.

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