August pending home sales jump 7.4 percent: NAR

NEW YORK Wed Oct 8, 2008 1:23pm EDT

New homes are shown for sale in Carlsbad, California September 25, 2008. REUTERS/Mike Blake

New homes are shown for sale in Carlsbad, California September 25, 2008.

Credit: Reuters/Mike Blake

NEW YORK (Reuters) - Pending sales of existing U.S. homes unexpectedly jumped in August to the highest in over a year, data from a real estate trade group showed on Wednesday.

The National Association of Realtors Pending Home Sales Index, based on signed contracts, rose 7.4 percent in August to 93.4 from an upwardly revised 87.0 in July on pent-up demand as affordability improved.

The jump may be fleeting, however, as global financial markets chaos has since escalated, some analysts said.

August's reading was 8.8 percent higher than a year earlier and was the highest since 101.4 in June 2007. Economists polled by Reuters had expected sales to drop by 1.8 percent.

"What we're seeing is the momentum of people taking advantage of low home prices," the association's senior economist Lawrence Yun said in a statement.

"Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie," in early September, he said. "August shows some unleashing of pent-up demand before the credit crisis accelerated in September."

Home funding giants Fannie Mae and Freddie Mac, the largest buyers of U.S. mortgage bonds, were taken under government control on September 7.

Yun said it is unclear how contract activity will be disrupted by the crisis on Wall St, "but we're hopeful most of the increase will translate into closed existing-home sales."

Pending home sales gained across all regions in August: up 18.4 percent in the West, 8.4 percent in the Northeast, 3.6 percent in the Midwest and 2.3 percent in the South.

"The pending home sales data is not a signal of where we are going. Foreclosed homes at bargain prices have probably been supporting it," said Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts.

"We shall see if these sales close and if those people will go through the transaction because people's finances have worsened since that time," he added. "Housing at first impacted the economy and the economy is now impacting housing in a vicious cycle."

The 30-year fixed mortgage rate will average 6.1 percent in the fourth quarter, rising to 6.6 percent by the end of next year, the NAR predicts.

The trade group forecasts U.S. existing home sales at 5.04 million this year, rising to 5.41 million in 2009, and new home sales of 503,000, falling to 471,000 next year.

Housing starts, including multifamily units, should drop 28.2 percent to 973,000 units this year, and fall further to 843,000 in 2009 as builders clear inventory, it added.

(Additional reporting by Julie Haviv; Editing by James Dalgleish)

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