Contract signings rose 1.5 percent in September

Contract signings rose 1.5 percent in September
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Pending home sales increased in September as higher contract signings in the South and West outpaced declines in the Northeast and Midwest.

The National Association of Realtors latest sales index, which tracks contract signings, rose 1.5 percent to 110 in September from 108.4 in August, the group said Thursday.

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With last month's gain, the index is 2.4 percent higher than September 2015 and has risen year-over-year for 22 of the past 25 months.

Pending home sales in the South rose 1.9 percent in September and jumped 4.7 percent in the West. 

Sales in the Northeast fell 1.6 percent while sales declined at a modest 0.2 percent pace in the Midwest.

Realtors say buyer demand is holding up this fall with reports of much stronger foot traffic than a year ago as jobs growth and low mortgage rates buoy the housing market.

”Although depressed inventory levels are keeping home prices elevated in most of the country, steady job gains and growing evidence that wages are finally starting to tick up are encouraging more households to consider buying a home,” said Lawrence Yun, NAR chief economist.

The report is the latest indicator reflecting the improving health of the housing market heading into the end of the year.

"The one major predicament in the housing market is without a doubt the painfully low levels of housing inventory in much of the country," Yun said.

"It's leading to home prices outpacing wages, properties selling a lot quicker than a year ago and the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices,” he said.

Other positive signs include upbeat homebuilder optimism and a drop in distressed sales — foreclosures and short sales — to their lowest share since NAR began tracking them in October 2008 and a rise in sales to first-time buyers.

Sales to first-time buyers reached 34 percent, which matches the highest share since July 2012 and was up 29 percent in September 2015.

Although mortgage rates are at historically low levels, first-time buyers have struggled to make a dent in the market with a lack of credit availability and rising prices.

A separate report reflected more promise for the housing market.

The homeownership rate in the July-September quarter rose to 63.5 percent, up from a historic low of 62.9 percent in the April-June quarter but slightly lower than the same period a year ago.

Household formation surpassed 1.1 million up from 944,000 in the spring. About 560,000 - or nearly half - of these households were owners, up from a loss of 22,000 in the previous quarter.

"I think this is good news in light of the fact that millennials now make up the largest pool of potential new households," said Ralph McLaughlin, the chief economist with Trulia.

Still there are hurdles for those who want to own a home, including home prices and rents that outpace their incomes.

"Given the headwinds, however, the homeownership rate is likely to get worse before it gets better," McLaughlin concluded.