Pending Sales Decline Slightly in August

The August Pending Home Sales Index issued by the NationalrnAssociation of Realtors  slippedrnslightly from July’s numbers, portending a few more months of depressed homernsales.  The index is based on homernpurchase contracts signed during the month and is considered a forwardrnindicator of rising or falling sales as those transactions close, usually withinrn60 days.  </p

The national index declined 1.2 percent to 88.6 in Augustrncompared to 89.7 in July.  This is 7.7rnpercent above the index in August 2010 when it stood at 82.3.  The index is based on a scale where 100 isrnequal to the average level of contract activity during the base year of 2001.</p

Contract signings were down in every region but the South wherernpending home sales rose 2.6 percent to an index value of 96.9, 7.6 percentrnhigher than the index one year earlier. rnThe index declined 5.8 percent in the Northeast to 63.6 (1.3 percentrnhigher than August 2010) and 3.7 percent in the Midwest.   The Midwestrnindex of 76.2 is 8.2 percent higher than a year ago.  Pending sales dropped 2.4 percent to 108.1 inrnthe West, a year over year increase of 10.5 percent. </p

Lawrence Yun, NAR chief economist, said the August figuresrnreflect an uneven market.  “The biggest monthly decline was in thernNortheast, which was significantly disrupted by Hurricane Irene in the closingrnweekend of August,” he said.  “But broadly speaking, contract signingrnactivity has been holding in a narrow range for many months.”</p

Given the pent-up demand in household formation, he said,rnthe market should be performing better.  “We continue to experience a pattern in whichrnfinancially qualified home buyers, willing to stay well within their means, arernbeing denied credit – a factor in elevated levels of contract failures. Basedrnon the improving fundamentals of population growth, some job additions, rentrnincreases and higher stock market wealth, we should be seeing existing-homernsales closer to 5.5 million, but are expecting just over 4.9 million thisrnyear.  The unnecessarily restrictive mortgage underwriting standards arernattenuating the housing recovery and are a risk factor for the overallrneconomy.”  </p

Yun blamed uncertainty for some of the hesitation to enterrnthe housing market.  “We need to removernthe road blocks to the housing recovery for people who are trying to takernadvantage of excellent affordability condition. Unfortunately, some buyers alsornwill face notably higher mortgage rates on jumbo loans because of a lack ofrncompetition in the banking industry.”

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