Home Sales Rise, Interest Rates Drop

Pending home sales rose for the seventh consecutive month in August, the National Association of Realtors has reported, the longest streak of monthly increases since the organization began reporting data in 2001.

Pending sales were up a seasonally adjusted 6.4 percent from July, reaching their highest level since March of 2007. The NAR's Pending Home Sales Index reached 103.8, on a scale where a score of 100 equals 2001 sales levels, the year the index began. The index hit its recent low in February 2009, when it bottomed out at 80.4.

"The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules," said Lawrence Yun, NAR chief economist. "No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month."

The strongest increases of the four U.S. regions tracked by the survey were in the Western United States, where pending sales were up 16.0 percent from the previous month and 22.3 percent for the year. Sales in the south were sluggish, however, posting a monthly increase of only 0.8 percent and an annual increase of 8.2 percent.

Pending sales in the Northeast were up 8.2 percent for the month and 12.0 percent for the year, and in the Midwest increased 3.1 percent for the month and 7.2 percent for the year, the lowest annual increase of the four regions.

Freddie Mac reports rates below 5 percent

The report came out as megalender Freddie Mac reported that 30-year interest rates fell below 5 percent in its weekly rate survey for the first time in four months. The average rate on 30-year fixed rate mortgages for the week ending Thursday, Oct. 1 fell to 4.94 percent with an average 0.7 points paid, down from 5.04 percent last week.

The rate is approaching the survey's all-time low of 4.78 percent, reported on April 2 of this year. Freddie Mac has been reporting weekly mortgage interest rates since 1991. The average 30-year rate one year ago was 6.10 percent. Thirty-year rates have now declined or held steady for seven consecutive weeks in the Freddie Mac survey.

The average 15-year fixed rate was also down, to 4.36 percent with 0.6 points, from 4.46 percent last week. It's the lowest 15-year rate the Freddie Mac survey has ever reported. Five-year Treasury indexed hybrid adjustable rate mortgages were down as well, to 4.42 percent on 0.6 points, down from 4.51 percent the week before.

Despite the declining rates, borrowers did not appear to be moving to take advantage of them. The Mortgage Bankers Association reported that new mortgage applications declined 2.8 percent in the week ending Friday, Sept. 23. Applications to refinance existing mortgages, which typically are highly sensitive to rate declines, were down 0.8 percent from the previous week and purchase applications were down 6.2 percent, both on a seasonally adjusted basis.

Unemployment rate rises

The slowing mortgage rate comes amid several recent signs of further weakness in the economy, including a worse-than-expected unemployment report released Friday by the Labor Department. Unemployment rose by 263,000 in September, according to the report, far worse than the 175,000 economists had predicted and higher than the 201,000 reported in August.

The overall unemployment rate ticked up a tenth of a point to 9.8 percent. The rate reverses a series of monthly declines, although the revised August rate was less than previously reported.