Pending Home Sales Experience Decline in September

Pending home sales declined in September, although activity remained higher than a year ago, according to a report from the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, fell 4.6 percent to 84.5 in September from 88.6 in August, but is 6.4 percent higher than September 2010 when it stood at 79.4. The data reflects contracts but not closings. “A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly two million net new jobs in the past 12 months,” said Lawrence Yun, NAR chief economist. The PHSI in the Northeast declined 4.7 percent to 60.6 in September, but is four percent above a year ago. In the Midwest, the index dropped 6.2 percent to 71.5 in September but remains 12.3 percent higher than September 2010. Pending home sales in the South fell 5.5 percent in September to an index of 91.6, but are five percent above a year ago. In the West, the PHSI declined 2.1 percent to 105.8 in September, but is 5.6 percent higher than in September 2010. “America’s monetary policy is contradictory and confusing, where some consumers with the best financial capacity and top-notch credit scores pay higher mortgage interest rates,” Yun said. “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,” said Yun. “We need a comprehensive approach to address housing issues—not additional impediments.”