Investing.com - Contracts to buy previously owned homes unexpectedly fell in October, as rising mortgage rates reduced the number of eligible buyers.
The National Association of Realtors (NAR) said its pending home sales index, which measures signed contracts for homes where transactions have not yet closed, decreased 2.6% to a reading of 102.1 after rising by 0.7% in the previous month.
Economists had forecast pending home sales rising by 0.8% last month.
NAR chief economist Larry Yun noted that it was the tenth straight month of declines and said that "the recent rise in mortgage rates have reduced the pool of eligible homebuyers".
Despite the uncertainty regarding the short-term outlook, Yun stressed that he is “very optimistic” about the long-term outlook as the current home sales level matched sales in 2000.
“However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8%. Additionally, there are more jobs today than there were two decades ago,” Yun said.
“So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty,” he explained.
Yun also voiced his opinion that the Federal Reserve should be less aggressive in increasing interest rates as the decline in oil and gasoline prices meant inflationary pressure was diminishing.
“Looking at the broader economy and keeping in mind that the housing sector is a great contributor to the economy, it would be wise for the Federal Reserve to slow the raising of rates to see how inflation develops,” he concluded.