Posted on Thursday, November 11, 2010
The number of contracts signed for purchases of previously owned homes unexpectedly dropped in September. The National Association of Realtors (NAR) said Friday that its pending home sales index slipped 1.8 percent – the first decline reported since June.
Economists polled by Reuters were anticipating a 3 percent increase. NAR’s pending sales index is looked to as a leading indicator of future home sales trends, and the fact that the September drop occurred before all the problems with foreclosure affidavits came to light and created uncertainties surrounding the purchase of REOs means there’s likely more volatility to come in home sales statistics.
Paul Dales, U.S. economist for the research firm Capital Economics, says because of the mess with foreclosure paperwork, some of the deals that were signed in September probably fell through in October as banks pulled foreclosed homes from the market.
“That means existing sales may well fall back,” Dales said. “[T]he housing recovery will be very slow. In fact, housing activity is best described as bouncing along the bottom.”
Lawrence Yun, NAR’s chief economist, also expressed concern over the effect banks’ recent foreclosure freezes could have on the market. “Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” he said.
“Nonetheless, 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, tight credit and appraisals coming in below a negotiated price continue to constrain the market,” Yun added.
In Friday’s report, Yun also outlined several key forecasts for housing conditions. He says mortgage interest rates are expected to gradually rise and average 4.9 percent next year, then rise to 5.8 percent in 2012.
Existing-home sales are forecast to gradually rise, with some occasional dips along the way. Yun is projecting sales numbers of previously owned homes to reach 5.1 million in 2011, up from about 4.8 million this year.
The Foreclosure Balancing Act
By: Carrie Bay