The National Association of Realtors’ (NAR) Pending Home Sales Index, which measures the number of contracts to purchase previously owned homes, declined 1.2 percent from July to August, it still remains above 2010 levels.
The August index, at 88.6, was down from 89.7 in July but up 7.7 percent from August 2010, when it stood at just 82.3. The index is based on signed contracts, so it does not reflect closings.
Lawrence Yun, the chief economist for the NAR, said the small decline was because of sharp geographical differences in market performance.
“The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” Yun said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”
The Northeast index fell 5.8 percent to 63.6 in August but is 1.3 percent higher than August 2010; the Midwest the index declined 3.7 percent to 76.2 but is 8.2 percent above last year; the South rose 2.6 percent to an index of 96.9 and is 7.6 percent higher than August 2010; and the West declined 2.4 percent to 108.1 but is 10.5 percent above a year ago.
For housing on a whole, Yun repeated what has become his mantra in recent weeks: market forces are limiting what should be a strong recovery in housing, given the unprecedented financing and affordability options currently available to buyers.
“We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” Yun said said. “We should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery.”
Ryan Sweet, a senior economist at Moody’s Analytics, told Bloomberg that the lackluster job market is also to blame for housing’s slow recovery.
“With the job market also foundering, there is every reason to think more buyers opted for the sidelines,” Sweet said. “The fundamentals also point to a difficult month for sales, even though mortgage rates have come down appreciably.”