US pending home sales shoot up in Oct, raising recovery hopes

30 November 2011 16:44  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales surged in October from September, the National Association of Realtors (NAR) said on Wednesday, ending a three-month slide and providing what the association termed a “hopeful sign” for the long-depressed US housing sector.

The association said that its pending home sales index rose to 93.3 in October, a 10.3% gain from the 84.5 measure reported for September.

The index had declined in July, August and September.

The October index reading of 93.3 also is 9.2% higher than the October 2010 level of 85.5.

The October advance is a hopeful sign, said Lawrence Yun, NAR chief economist.

“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is pent-up demand from buyers who normally would have entered the market” under such advantageous conditions, Yun said.

With housing prices and interest rates at historic lows, NAR contends that more would-be home buyers should be making purchases. Those purchases have been thwarted in many cases, the real estate group contends, by overly strict mortgage loan criteria and low home appraisals that can kill a pending sale.

A residential property sale is listed as “pending” when a contract has been signed but the transaction has not been closed and funded with a mortgage loan. A pending sale usually closes within a month or two of contract signing.

The association's pending sales index is seen as a reliable, forward-looking indicator for near-term expectations in the US housing sector.

The index is measured against the 100 baseline set by the NAR in 2001 to represent an average or healthy pace of pending home sales contracts.

The housing industry is a key downstream consumer for chemicals, especially the construction of new homes, which drives demand for a wide range of chemicals, resins and derivative products.

While sales of existing homes do not generate a parallel demand for chemicals, those sales do take homes off the market, reducing the inventory of unsold properties. That, in turn, helps build demand for new residential construction.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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