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US pending home sales fall for 2nd month as high prices cut into housing-market rally

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FILE - In this Oct. 22, 2019, file photo, a sign stands outside a home for sale in southeast Denver. On Friday, Feb. 21, 2020, the National Association of Realtors reports on sales of existing homes in January, (AP Photo/David Zalubowski, File) FILE – In this Oct. 22, 2019, file photo, a sign stands outside a home for sale in southeast Denver. On Friday, Feb. 21, 2020, the National Association of Realtors reports on sales of existing homes in January, (AP Photo/David Zalubowski, File)

  • The National Association of Realtors’ index of pending US home sales fell 1.1% to 128.9 in October, according to data published Monday.
  • Economists surveyed by Bloomberg expected the gauge to rise 1% through the month. The reading also marks a second straight decline.
  • The housing market has served as a rare bright spot in the nation’s economy, but rising prices and limited supply threaten the strength seen in recent months.
  • “This recent weakening suggests that existing home sales—which generally lag pending home sales by one or two months—will soften moving forward,” Daniel Silver, an economist at JPMorgan, said.
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Sales of previously owned homes in the US fell for a second straight month in October, signaling that the housing boom seen throughout the pandemic may be slowing.

The National Association of Realtors’ index of pending home sales fell 1.1% to 128.9 last month, according to data published Monday. The index’s September decline was revised to 2%. The index still sits 20.2% higher from the year-ago period.

Economists surveyed by Bloomberg expected the gauge to climb 1% through October.

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“This recent weakening suggests that existing home sales—which generally lag pending home sales by one or two months—will soften moving forward,” Daniel Silver, an economist at JPMorgan, said in a note. “All that said, the recent cooling in the pending home sales data has reversed only a small portion of the surge reported over the prior few months.”

Pending sales fell or stayed the same in all regions but the South, where they ticked just 0.1% higher. The Northeast saw the biggest decline, with the region’s index dropping 5.9% to its lowest level since July.

The unexpected pullback suggests rising home prices and limited supply is starting to impede the housing market’s rally. The sector has served as a rare bright spot in the weakened economy, largely due to record-low interest rates driving the rate of purchases higher.

Sales of new and previously owned homes surged through the pandemic, but with homebuilders struggling to keep up, higher prices pose a risk to the buying spree.

“The housing market is still hot, but we may be starting to see rising home prices hurting affordability,” Lawrence Yun, NAR’s chief economist, said.

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