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Pending home sales in the U.S. showed a bigger than expected rebound in the month of August, according to a report released by the National Association of Realtors on Thursday.
NAR said its pending home sales index surged up by 1.6 percent to 107.3 in August after plunging by 2.5 percent to 105.6 in July. Economists had expected pending home sales to climb by 0.9 percent.
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.
With the notable monthly increase, pending home sales in August were up by 2.5 percent compared to the same month a year ago, reflecting a turnaround from the 0.3 percent year-over-year drop in July.
"It is very encouraging that buyers are responding to exceptionally low interest rates," said NAR chief economist Lawrence Yun. "The notable sales slump in the West region over recent years appears to be over. Rising demand will reaccelerate home price appreciation in the absence of more supply."
Pending home sales in the West region led the rebound, spiking by 3.1 percent in August after tumbling by 3.4 percent in July.
The report said pending home sales jumped by 1.4 percent in both the Northeast and South and rose by 0.6 percent in the Midwest.
"With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020," said Yun. "Unfortunately, so far in 2019, new home construction is down 2.0%."
"The hope is that housing starts quickly move into higher gear to meet the higher demand," he added. "Moreover, broader economic growth will strengthen from increased housing activity."
NAR forecasts home sales to climb by 0.6 percent in 2019 before surging up by 3.4 percent in the 2020. Housing starts are predicted to increase by 2.0 percent in 2019 and jump an additional 10.6 percent in 2020.