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U.S. Pending Home Sales Unexpectedly Fall For Fifth Straight Month In October

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Pending home sales in the U.S. unexpectedly saw a modest decrease in the month of October, according to a report released by the National Association of Realtors on Monday, with pending sales falling for the fifth consecutive month.

NAR said its pending home sales index dipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September. The modest drop came as a surprise to economists, who had been expecting pending sales to rise by 1.1 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

"The government shutdown in the first half of last month sidelined some potential buyers," said Lawrence Yun, NAR chief economist. "In a survey, 17 percent of Realtors reported delays in October, mostly from waiting for IRS income verification for mortgage approval."

"We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions," he added. "Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors."

The report showed that modest increases in pending home sales in the Northeast and Midwest were offset by declines in the South and West.

While pending home sales in the Northeast and Midwest rose by 2.8 percent and 1.2 percent, respectively, pending sales in the South slipped by 0.8 percent and pending sales in the West fell by 4.1 percent

Yun said the notable drop in pending home sales in the high-cost Western region came as tight inventory held back contract offers.

He expects generally flat home sales going into 2014 but continued growth in home prices from limited inventory conditions, NAR said.

NAR said existing-home sales should be nearly 10 percent higher in 2013 than in 2012, totaling just above 5.1 million.

The national median existing-home price for 2013 is projected to rise 11 percent year-over-year before cooling to a 5.0 to 5.5 percent increase in 2014.

Tuesday morning, the Commerce Department is due to release its reports on housing starts in both September and October, while Standard & Poor's is scheduled to release its report on home prices in major metropolitan areas in September.

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