(RTTNews) - Partly reflecting a decline in inventory and a small rise in mortgage rates, the National Association of Realtors released a report on Wednesday unexpectedly showing a sharp pullback in U.S. pending home sales in the month of October.
NAR said its pending home sales index plunged by 1.7 percent to 106.7 in October after surging up by 1.4 percent to a revised 108.6 in September.
Economists had expected pending home sales to climb by 0.8 percent compared to the 1.5 percent jump originally reported for the previous month.
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.
Despite the monthly decrease, pending home sales in October were still up by 4.4 percent compared to the same month a year ago.
"While contract signings have decreased, the overall economic landscape remains favorable," said NAR's chief economist Lawrence Yun.
He added, "Mortgage rates continue to be low at below 4% - which will attract buyers - employment levels are strong and many recession claims have dissipated."
The unexpected pullback in pending home sales reflected decreases in all regions except the Northeast, where pending home sales jumped by 1.9 percent.
NAR said pending home sales plunged by 3.4 percent in the West, 2.7 percent in the Midwest and 1.7 percent in the South.
Yun argued homebuilders need to correct the inadequate levels of inventory across the country, saying, "There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation's housing market and overall economy."
"We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the U.S. population is projected to increase by more than 40 million over this period," he added. "Clearly, home builders must step in and construct more housing."
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