Pending home sales index at lowest level ever

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Pending sales of existing-homes will be dampened as mortgage disruptions continue to impact the housing market, says the National Association of Realtors.

The NAR Pending Home Sales Index fell 6.5 percent to 85.5 from a revised 91.4 during July, based on contracts signed in August. It was 21.5 percent below the August 2006 index of 108.9.

The PHSI in the West was down 2.7 percent during August to 80.3 and was 27.1 percent below a year ago.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

“The impact was greater in high-cost markets that are more dependent on jumbo mortgages,” said economist Lawrence Yung, “In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked.”

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

In the Midwest, the index fell 2.9 percent from July to 78.1 and is 18.0 percent lower than August 2006. The index in the Northeast fell 8.3 percent in August to 77.3 and was 18.3 percent below a year ago. In the South, the index dropped 9.5 percent during August to 97.8 and was 21.3 percent below August 2006.