Renewed pain for home sales
Sign of continued trouble for housing: Number of existing homes under sales contract drops 4.7% in May after an unexpected rise the month before.
NEW YORK (CNNMoney.com) -- The number of homes under sales contracts fell more than expected in May after a surprising spike the month before, a real estate trade group said Tuesday.
The report by the National Association of Realtors was another sign that the nation's housing problems are not abating.
The Realtors' Pending Home Sales Index fell to 84.7 in May, down 4.7% from an upwardly revised reading of 88.9 in April. The index was 14% below its level in May 2007.
The recent decline was steeper than the 2.8% fall that economists had forecast, according to a consensus of estimates compiled by Briefing.com.
"The overall decline in contract signings suggests we are not out of the woods by any means," said Lawrence Yun, NAR chief economist.
Yun said that some pullback had been expected after April's surprise increase. The index jumped more than 7% in April as falling home prices sparked a bout of bargain shopping.
"The housing market had a nice bounce in April - too bad it doesn't appear to have carried through into May and June," said Mike Larson, real estate analyst at Weiss Research.
Larson says the May decline was caused by falling consumer confidence, rising unemployment, tight credit conditions and high energy and food costs straining household budgets.
"Unless and until the economic clouds part, we'll likely see the housing market continue to struggle," Larson said.
In the report, the NAR lowered its existing-home sales outlook for 2008, saying it now expects sales of 5.31 million, down from the 5.39 million forecast in April.
The NAR said existing home prices are also expected to fall. The aggregate median existing-home price is projected to fall 6.2% this year to $205,300, and then rise by 4.3% in 2009 to $214,100, the report indicated.
The outlook for new-home sales was also revised lower to 525,000 from the 529,000 prediction a month ago. And the median new-home price was expected to decline 3.2% to $239,300 this year.
Pending home sales declined in all regions. In the West, they declined 1.3% during May but remain 2% above year-ago levels.
Declines were steepest in the South, where May pending home sales declined 7.1%. They fell 2.9% in the Northeast and 6% in the Midwest.
Still, the NAR found double-digit pending sales gains in May from a year ago in Colorado Springs, Colo.; Sacramento, Calif.; and Spartanburg, S.C.
"Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half," said Yun.
In some cases, the differences in home prices, and consequently home sales, can be attributed to the ongoing fallout from the subprime crisis.