September pending home sales fall

The worsening financial crisis stops bargain hunters in their tracks.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Les Christie, CNNMoney.com staff writer

How secure is your job?
  • Very safe
  • Safe, for the time being
  • Not safe at all
Mortgage Rates
30 yr fixed 3.80%
15 yr fixed 3.20%
5/1 ARM 3.84%
30 yr refi 3.82%
15 yr refi 3.20%

Find personalized rates:
 

Rates provided by Bankrate.com.

NEW YORK (CNNMoney.com) -- Homebuyers pulled back some more in September amid turmoil in the financial markets.

The Pending Home Sales Index for the month fell 4.6% to 89.2 after climbing 7.4% in August, according to the National Association of Realtors (NAR). Still, the index was up 1.6% from a year ago.

NAR said the dip in sales was tempered by a sharp decline in prices, which fell 9% year-over-year in September. Also propping up sales to some extent were affordable mortgage interest rates, which dipped below 6% for a 30-year fixed-rate loan during the month, according to Freddie Mac (FRE, Fortune 500).

It doesn't look like things will improve soon.

"Right now, we're in a recession, and unemployment will increase through 2009," said NAR chief economist Lawrence Yun. "Consumer spending has halted and businesses are very cautious of expanding. It is unclear by how much the global economic slowdown will dampen U.S. exports, which had been rising strongly."

In contrast to Yun, The National Bureau of Economic Research - which is the organization whose definition of a recession is most widely accepted - has yet to call the current downturn a recession.

Yun expects that the economy will continue to deteriorate, with the gross national product contracting through the end of 2008 and first quarter of 2009.

"The depth of the recession depends entirely on housing," he said. "With sufficient housing stimulus, the recession will be shallow. If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation's output and income in a severe recession."

One bright spot: NAR reports that the drop in home prices, combined with low interest rates, have brought home buying affordability to 2003 levels. But the improved affordability may not be enough to quickly bring housing all the way back into recovery.

"To me [the pending home sales drop] is another indication that we haven't hit bottom yet in the housing market," said Nariman Behravesh, chief economist for Global Insight.

The financial market turmoil and the freezing of lending have slowed home sales. "A lot of people simply can't get a mortgage these days and that's a key element," he said.

Yun, however, noted that pending home sales did increase in the regions that have already seen massive price declines.

September sales volume climbed 3.7% in the West, and was 39.5% above a year ago. In the Midwest the index inched down 0.7% to come in 3.1% below September 2007. Pending sales in the South dropped 7.9% for the month and were down 11.3% compared with a year ago. In the Northeast, the index dropped 16.8% for the month and 9.4% year-over-year.

With the economy slowing, Yun revised his forecast for existing home sales downward to 5.02 million for all of 2008. Last month, he forecast sales of 5.04 million existing homes.

The total should rise to 5.32 million in 2009, according to Yun. He said new home sales are likely to amount to 487,000 for 2008 and 413,000 in 2009.  To top of page

Find mortgage rates in your area


Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.