Ahead of the Bell: US Home Sales

The Associated Press

Sales of previously occupied U.S. homes were likely unchanged last month, evidence that the housing market's recovery remains sluggish.

Economists forecast that October sales were at a seasonally adjusted annual rate of 4.75 million homes, according to a survey by FactSet. That would be the same as September's total.

The National Association of Realtors will release the report at 10 a.m. Eastern time Monday.

In September, sales of previously occupied homes fell 1.7 percent. That drop came after sales soared 7.8 percent to a two-year high in August.

The number of contracts signed to buy homes ticked up slightly in September, suggesting a slight gain may occur in October or November. Increases in signed contracts are usually followed by higher sales one or two months later.

Some economists think Superstorm Sandy may have pushed down sales last month. Sandy slammed into the East Coast Oct. 29, and could have prevented sales from closing in the last few days of the month.

Existing home sales have been held back by a low supply of homes available for sale. There were just 2.32 million available homes in September. It would take just 5.9 months to exhaust that supply at the current sales pace, the lowest sales-to-inventory ratio since March 2006.

Another drag on sales is that any potential home buyers have had trouble qualifying for mortgages or can't afford the larger down payments banks are seeking.

Federal Reserve Chairman Ben Bernanke said Thursday that banks' overly tight lending standards may be preventing sales and holding back the U.S. economy.

Some tightening of credit standards was needed after the 2008 financial crisis, but "the pendulum has swung too far the other way," Bernanke said.

The Fed has been trying to encourage home sales by purchasing Treasury bonds and mortgage-backed securities in an effort to keep long-term interest rates low. Mortgage rates have fallen to record lows. The average rate on a 30-year mortgage fell to 3.34 percent last week, the lowest on records dating from 1971.

There are signs the housing market is recovering. Applications for mortgage loans to buy homes jumped 11 percent in the week ended Nov. 9, compared with a week earlier, the Mortgage Bankers' Association said last week. Purchase applications are up 22 percent in the past year.

Foreclosures are still slowing. The number of properties that began the foreclosure process in the first 10 months of the year fell 8 percent compared with the same period last year, RealtyTrac said last week.

Home prices have been rising steadily, though they remain lower than they were six years ago. And builders broke ground on new homes and apartments at the fastest pace in more than four years in September. The jump could help boost the economy and hiring.

Builders are more confident because they are seeing more prospective buyers visit properties. The National Association of Home Builders/Wells Fargo builder sentiment index inched up to its highest level in more than six years in October.