October 27, 2011 (Chris Moore)
The Pending Home Sales Index (PHSI) declined by 4.6 percent to 84.5 in September according to the National Association of Realtors (NAR). This is the third consecutive month that the Index has posted a decline.
Contract activity still remained 6.4 percent higher than last year when the Index stood at 79.4.
All regions in the Index posted a decline in their monthly level of sales contract activity, but remained higher than the levels posted a year ago.
Pending home sales in the South declined by 5.5 percent to 91.6 but were 5.0 percent higher than a year ago, while in the West, pending home sales fell 2.1 percent to 105.8, but were 5.6 percent higher than in September of 2010.
In the Northeast, the PHSI slipped 4.7 percent to 60.6 in September, but was still 4.0 percent higher than September 2010, and in the Midwest, the Index fell 6.2 percent to 71.5, but was 12.3 percent higher than a year ago.
The PHSI is a forward looking indicator which generally indicates closings one to two months in the future.
Lawrence Yun, chief economist of NAR, blamed an underperforming housing market on tight credit standards and on contradicting and confusing government policies.
“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.
“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,” he added.
Yun was referring to the Federal Reserve’s latest attempts to keep mortgage rates low by swapping short term debt for long term debt yet the federal government allowed the higher conforming loan rates to expire at the end of September which has resulted in some buyers now needing to take out jumbo loans for their purchases which carry a higher interest rate.
Tags: NAR, pending home sales, existing home sales, tight credit, economic uncertainty, housing recovery