The number of people who signed contracts to buy homes fell in September after two months of gains, a possible fallout from foreclosure moratoriums which have disrupted activity in the housing market.
The National Association of Realtors said Friday that its index of sales agreements for previously occupied homes dropped 1.8 percent in September to a reading of 80.9. Contract signings fell in every region of the country except the West.
The setback highlighted the continued problems facing the housing industry as it struggles to mount a sustained recovery from a deep recession.
Analysts said some of the weakness in September probably reflected disruptions in the housing market caused by moratoriums imposed by banks on mortgage foreclosures. Banks halted tens of thousands of foreclosures as they investigated allegations that some foreclosures had involved flawed legal documents.
“The foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” said Lawrence Yun, chief economist for the Realtors.
But he added, “There appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves.”
However, other analysts said that housing is still bumping along the bottom following a severe economic downturn.
The Federal Reserve announced on Wednesday that it planned to pump an additional $600 billion into the banking system over the next eight months in an effort to drive interest rates on such things as mortgages even lower in an effort to boost a still-weak economy. Private economists worried that this may not be enough to boost housing.
“The foreclosure crisis, which really got going at the start of last month, may mean that some of the deals that were signed in September fell through in October as banks pulled foreclosed homes from the market,” said Paul Dales, an economist at Capital Economics.
Dales said it could mean that sales of previously owned homes will slip in coming months.
The index of pending home sales provides an early measurement of sales activity. There is usually a one- to two-month lag between a sales contract and a completed deal.
A reading of 100 indicates that average level of sales activity in 2001, when the index started. The reading was above the 100 threshhold from March 2003 through April 2007 and then sank as the country fell into a deep recession – a downturn that was led by a bursting of a bubble in housing as sales of new and previously owned homes fell sharply.
With the drop in September, the index stands 25 percent below its level of 107.8 in September 2009, when the index surged due to a home-buyers tax credit. A year ago, first-time buyers were rushing to take advantage of the initial deadline for the credit. Congress moved to extend the credit through April 30 of this year, another deadline that spurred a surge in sales, but then was followed by the latest sales slump.
By region of the country, the pending home sales index slipped 1.7 percent in the Northeast in September compared to the August level and is down 28.3 percent from September 2009. In the Midwest, the index fell 5.7 percent from the previous month and is down 33 percent from a year ago. In the South, the index fell 3.5 percent from a month earlier and is 19.1 percent below the year-ago level.
Only the West saw an increase in pending home sales in September, a rise of 3.5 percent from August. But even with the increase, pending sales were 24.7 percent lower than September 2009.