The National Association of Realtors has released data from its monthly Pending Home Sales Index, an indicator based on home contracts that have been signed nationwide. The index fell 3.2 percent to a level of 86.5 in July, compared with an upwardly revised reading of 89.4 in June.
The NAR said the numbers indicate “little movement” in the near future for home sales.
“Pending home sales are oscillating month-to-month, with the long-term trend essentially flat,” said Lawrence Yun, chief economist for the NAR. Yun also said, “Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings.”
Those two mortgage lenders, by far the biggest in the nation, were put under the conservatorship of the Federal Housing Finance Agency this week, a temporary nationalization fix while the companies’ portfolios are greatly reduced in size.
The assessment differs from earlier statements, such as in April when the NAR predicted the Pending Home Sales Index would start to see an upturn in the second half of 2008.
At that time, the group also said it expected the state of home sales to come into “clearer focus” over the summer, but that was not the case. Yun said home sales continue to edge up and down, with dramatic differences in the state of various local markets.
“Contract signings have been steaming ahead, nearly doubling in activity from a year before in several California and Florida markets,” he said. “The outer Washington, D.C., exurbs also are coming around very strongly. The Northeast region retreated following a robust gain in the previous month, and soft activity was observed in the broad midsection of America despite very affordable conditions.”
The PHSI in the Midwest rose 2.8 percent to 81.6 in July but remains 2.4 percent below a year ago. In the South, the index was unchanged, holding at 93.7 but is 13.4 percent below July 2007. The index in the Northeast fell 7.5 percent to 73.6 in July and is 13.2 percent below a year ago. In the West, the index dropped 10.6 percent to 90.3 but is 6.5 percent higher than July 2007.
Yun said there remain many ambiguities in the marketplace. “The economy is producing more, yet cutting jobs. A first-time home buyer tax credit and lower interest rates on newly conforming jumbo loans favors consumers, yet buyer confidence remains low,” he said. “Even with the Treasury Department’s direct intervention in the secondary mortgage market, it is unclear if we will go back to sound normal underwriting criteria, or if it will remain overly stringent. The housing market outlook is very cloudy.”