Pending home sales fall 3.5% in May

WASHINGTON – Fewer contracts for previously-owned homes were signed in May nationwide, according to the National Association of Realtors, which cited tighter lending criteria and a lack of buyer confidence.
The NAR’s Pending Home Sales Index fell 3.5 percent in May to a five-year low of 97.7, after falling 3.4 percent in April to a revised 101.2. (100 = 2001) The PHI was 13.3 percent below its May 2006 reading of 112.7.
It lagged even the worst of estimates in a survey of 27 economists by Bloomberg News, whose median forecast called for the index to rise 0.5 percent in May from the originally reported April level of 101.4. Their estimates ranged from a rise of 2.0 percent to a decline of 2.5 percent.
The index, based on a national sample that typically represents 20 percent of existing-home transactions, is a leading indicator for the housing sector. A sale is listed as pending when the contract has been signed but has not yet closed; not all sales close, but most are finalized within a month or two of signing.
“Some transactions are being postponed from mortgage market disruptions,” said Lawrence Yun, the NAR’s senior economist. “But better supervised lending will put housing in a fundamentally healthier state over the long term.”
Yun attributed part of the decline to a lack of confidence among would-be buyers, noting that “Mortgage purchase applications are trending up, with some of the rise due to buyers reapplying for alternatives to subprime financing.”
Going forward, Yun said, “home sales should stay close to present levels in the months ahead, given an accumulating pent-up demand. … As consumer confidence improves, home sales will rise.”
“I don’t think it’ll be a quick recovery by any means,” Russell Price, senior economist at H&R Block Financial Advisors in Detroit, told Bloomberg News. “Housing will be an ongoing drag for the economy.”
In the Northeast, the PHI rose 5.6 percent in May to 95.4, which was 9.6 percent below its level a year earlier. The index also rose in the West, but fell in the South and Midwest.
The National Association of Realtors is the nation’s largest trade association, with more than 1.3 million members in all aspects of residential and commercial real estate. Additional information is available at www.realtor.org.