WASHINGTON (Reuters) - Contracts to buy U.S. previously owned homes increased for the first time in seven months in December as mortgage rates declined, another hopeful sign that the embattled housing market was starting to stabilize.
The National Association of Realtors (NAR) said on Friday its Pending Home Sales Index, based on signed contracts, rose 2.5% to 76.9 last month. That was the first increase in pending home sales since May. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would fall 0.9%. Pending home sales decreased 33.8% in December on a year-on-year basis.
"This recent low point in home sales activity is likely over," Lawrence Yun, the NAR's chief economist, said in a statement.
Contracts increased in the South and West, but fell in the Northeast and Midwest. That could see existing home sales rebounding or posting a modest decline after logging their 11th straight monthly decrease in December.
The Federal Reserve's fastest cycle of interest rate hikes since the 1980s has driven housing into recession. Falling mortgage rates have, however, raised hopes that the housing market could soon stabilize, though at depressed levels.
The rate on a 30-year fixed mortgage ticked down to an average 6.13% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac (OTC:FMCC).
The rate was down from 6.15% in the prior week and has dropped from an average of 7.08% early in the fourth quarter, which was the highest since 2002. But it remains well above the average 3.55% seen during the same period last year.
Government data this week showed new home sales increasing for a third straight month in December.