Preview: Pending Home Sales Likely to Resume Downward Trend

By: • Tue, Mar 3 2009, 8:40 AM

Pending home sales are expected to resume their downward trend in January, after unexpectedly rebounding in December.

Sales are forecast to fall 3.5% in the month, after jumping 6.3% in the previous month. Economists said the unexpected bounce was due to buyers who were enticed by bargain prices and foreclosed homes.

BMO economist Robert Kavcic is a little more pessimistic, forecasting a steeper 5% drop in December. "Foreclosure sales have been giving these numbers a boost, certainly not a healthy source of demand," he noted.

Economists from Barclays Capital expect a 3.5% contraction due to continued pessimism about the economy.

"Despite deep discounting from foreclosures, sales remain weak as a lack of confidence in the economy discourages potential buyers," they wrote in a client note.

"The pickup in activity in December owed to a jump in sales in the Midwest and South, which we deem unsustainable and likely to be reversed in January," they noted. They do, however, expect sales to increase in the West due to a large presence of foreclosed homes, which have a faster turnover rate.

The data will be released by the National Association of Realtors at 10 a.m. EST.