US pending home sales unexpectedly drop

US pending home sales unexpectedly dropped in October, according to data from the National Association of Realtors.

The NAR's monthly index fell 2.6% to 102.1 from 104.8 in September, missing expectations for a 0.5% increase. Meanwhile, September's index was revised up to 104.8 from 104.6.

The NAR's chief economist, Lawrence Yun, said: "The recent rise in mortgage rates has reduced the pool of eligible homebuyers."

While the short-term outlook is uncertain, Yun stressed that he is very optimistic about the long-term outlook. The current home sales level matches sales in 2000.

"However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago," said Yun. "So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty."

The pending home sales index in the Northeast rose 0.7% to 92.9 last month, while the index for the Midwest declined 1.8% to 100.4. The gauge for the South fell 1.1% to 118.9 in October, while the index for the West decreased 8.9% to 84.8.

Pantheon Macroeconomics said: "The hurricanes strike again, probably. Pending home sales - along with completed existing home sales and new home sales - are now well below the level implied by the path of mortgage applications. A rebound over the next couple of months, therefore, seems a good bet.

"The housing market has peaked, but it isn’t rolling over - November mortgage applications are running only about 2.4% lower than in the same month last year - and the data for the late fall and winter look quite likely to surprise to the upside, given how negative sentiment on the market has become."