Pending home sales hit another low

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NEW YORK (CNNMoney.com) -- The number of homes under contract for sale fell in March, hitting a record low for the second consecutive month, according to a report released Wednesday.

The National Association of Realtors' (NAR) Pending Home Sales Index fell to 83 in March, down 1% from a downwardly revised reading of 83.8 in February. The rate of decline was in line with a consensus estimate of economists compiled by Briefing.com.

March's reading was down 20.1% from the same period last year and 35% from the index's peak in April 2005.

The trade group launched the Pending Home Sales index in 2001, and a reading of 100 is equal to results that first year.

"Clearly, a string of unimpressive housing numbers is continuing," said Mike Larson, a real estate analyst at Weiss Research.

The Pending Home Sales Index is considered a more forward-looking indicator of home sales than other real estate forecasts such as the NAR's more closely watched existing home sales report. Unlike existing home sales estimates, pending home sales are measured before the time of closing, typically a month or two before a sales contract is signed.

"A significant chunk of these pending sales won't turn into closed sales," noted Larson, who said lenders' tightening of their prime loan standards and the unavailability of subprime loans have made home financing difficult.

The Realtors issued a slightly improved forecast for existing home sales, projecting first-quarter sales to decline 14.4% from the same period last year. In April, the group had forecast a 14.5% drop. NAR maintained its previous prediction for a total 4.7% drop in existing home sales in 2008.

"As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half," NAR chief economist Lawrence Yun said in a statement.

Sales by homeowners have continued to drop despite plummeting home prices, which have tumbled 12.8% since median prices reached a record in July 2006.

Existing home sales for March will be released May 23.

New home sales may take a bit longer to make up lost ground than sales by homeowners. The Realtors gave a bleaker forecast for second-quarter new home sales, saying it expects a 39.2% decline, versus a previous forecast of a 32.7% drop. But NAR now estimates a much larger rise in new home sales in 2009, rising 10.1% instead of the previous forecast for 4.6% growth.

"If there is a bright spot out there, we're starting to see [housing] inventories in some markets declining," said Larson. "Homes that are priced right are moving, which is the first step towards recovery."

The NAR upwardly revised its forecasts for second-quarter and full-year real GDP growth, the broadest measure of the nation's economic strength. But it cut its expectations for nonfarm job growth in the second quarter and all of 2008.