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Contracts to buy homes hit highest level in a year

WASHINGTON - The number of Americans who signed contracts to buy homes jumped in October to the highest level in a year. But the gain follows three months of declines and is not enough to signal a housing recovery.

The National Association of Realtors said yesterday its index of sales agreements rose 10.4 percent last month to a reading of 93.3.

A reading of 100 is considered healthy. The last time the index was that high was in April 2010, one month before a federal home-buying tax credit expired.

Contract signings usually indicate where the housing market is headed. There is typically a one- to two-month lag between a signed contract and a completed deal.

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But a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than the bid. A sale is not final until a mortgage is closed.

Even with the gains, contracts to buy homes are roughly at the same level as they were before the tax credit expired, said Joshua Shapiro, chief US economist at MFR Inc.

“In absolute terms, this is a very depressed level,’’ he said.

Homes are the most affordable they’ve been in decades. Long-term mortgage rates are hovering near historic lows, and prices in some metro areas have tumbled.

Yet this year could be the worst year for sales since the housing bubble burst. Sales of previously occupied homes could end up being the fewest since 1997. And sales of new homes are headed for the worst year on records dating to 1963.

Americans are holding off for a number of reasons. High unemployment and weak job growth have deterred many would-be buyers. Loans are also harder to come by. Many lenders are requiring 20 percent down payments and strong credit scores to qualify.