The latest National Association of REALTORS® Pending Home Sales Index found that sales dropped 1.2 percent in August.
Lawrence Yun, NAR chief economist, said the decline reflects an uneven market. “The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” he said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”
The Northeast saw pending home sales decline by 5.8 percent, leaving it only marginally higher (1.3 percent) from the rate in August 2010. The other regions posted declines as well, but were all significantly higher than rates seen in August 2010.
The Midwest fell by 3.7 percent, but remained 8.2 percent higher than a year ago. The South fell just 2.6 percent, but is a healthy 7.6 percent above last year. The West experienced a decline, too. It fell 2.4 percent, but is 10.5 percent higher than a year ago.
Yun says pent-up demand is creating an underperforming market. “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,” he said. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, 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 and are a risk factor for the overall economy.”
Although economic growth as measured by the Gross Domestic Product is expected to remain positive, uncertainty is causing some consumer hesitation. “We need to remove the road blocks to the housing recovery for people who are trying to take advantage of excellent affordability conditions,” Yun added. “Unfortunately, some buyers also will face notably higher mortgage rates on jumbo loans because of a lack of competition in the banking industry.