NAR Reports Pending Sales Down - Housing Market "Excessively Constrained"

Pending home sales fell for the third consecutive month in September according to data released today by the National Association of Realtors^® (NAR)^.  NAR's Pending Home Sales Index, a forward looking indicator of home sales contracts signed during the month, fell 4.6 percent to 84.5 in September from 88.6 in August and 89.7 in July.  Even with the downturn the index is still 6.4 percent higher than the September 2010 level of 79.4. 

Pending sales were down in every region of the country on a month-to-month basis but every region also showed improvement over levels of one year ago.  In the Northeast pending sales were down 4.7 percent from August but up 4.0 percent from September 2010.  The current level is 60.6.  In the South pending sales declined to 91.6, a 5.5 percent month-over-month loss but 5 percent higher than one year ago.  The Midwest index was 71.5 in September compared to 76.2 in August and 63.7 one year ago, a 12.3 percent improvement.  In the West the index declined 2.1 percent to 105.8 in September but is 5.6 percent higher than September 2010.

Lawrence Yun, NAR chief economist, called the housing market "excessively constrained."   "A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly 2 million net new jobs in the past 12 months," he said.

Yun was critical of current federal actions.  "America's monetary policy is contradictory and confusing," he said, where some consumers with the best financial capacity and top-notch credit scores pay higher mortgage interest rates.  The Federal Reserve evidently has been attempting to lower mortgage rates, yet more consumers are faced with taking out jumbo loans that carry higher interest rates."

Yun emphasized the need to reinstate higher loan limits in 42 states.  "Just leaving excessive cash to sit in banks and not work into the economy is a drag on the overall recovery," he said.  "We need a comprehensive approach to address housing issues - not additional impediments."

The Pending Home Sale Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  The index base of 100 equals the average level of contract activity in 2001.  Homes entering contract are generally expected to close within two months.

Pending Home Sales