WASHINGTON (Reuters) - Contracts to buy previously owned homes increased more than expected in September, suggesting that the housing market was getting a lift from lower mortgage rates though tight supply remains a constraint.
The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed last month, advanced 1.5% to a reading of 108.7.
Economists polled by Reuters had forecast pending home sales rising 0.9% in September.
Pending home contracts become sales after a month or two, and last month's increase suggested a rebound in existing home sales, which declined 2.2% in September. Pending home sales surged 3.9% in September from a year ago.
A persistent shortage of homes for sale has constrained the housing market despite lower mortgage rates and a slowdown in prices. Builders continue to complain that a lack of land and labor is making it difficult to break more ground especially on homes priced below $200,000, which are most sought after.
Investment in homebuilding has contracted for six straight quarters, the longest such stretch since the Great Recession.
In September, home purchase contracts increased 2.6% in the populous South. Contracts rose 3.1% in the Midwest. They declined 1.3% in the West and fell 0.4% in the Northeast.