HOME SALES DROP 6.5% - LOWEST EVER!
Pending home sales drop 6.5%, lowest level on record
WASHINGTON (Reuters) — Pending sales of previously owned homes fell a larger-than-expected 6.5% in August from July as more borrowers seeking home loans were turned away by cautious lenders, a real estate trade group said Tuesday.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in August, fell to 85.5, lowest since records began in January 2001. The previous low was 89.8 in September 2001.
The index was 21.5% below the August 2006 level of 108.9.
The August drop was sharper than the 2.1% decline economists were expecting for August and comes after existing home sales for the month dipped to their lowest level in five years.
Notably, more than 10% of sales contracts fell through late in the process, largely due to borrower trouble getting loans, according to an NAR survey.
The problems, experts say, were seen especially in expensive areas where borrowers need to take out "jumbo" home loans above $417,000 that can't be sold to government-sponsored mortgage companies Fannie Mae and Freddie Mac
In late August, the gap in mortgage rates between jumbo loans and "conforming" loans below the $417,000 limit widened to 0.93 percentage points, up from a typical level of 0.2 percentage points, according to financial publisher HSH Associates.
That difference makes it harder for prospective buyers — particularly in the pricey Northeast and West Coast markets — to afford more expensive homes.
"This is probably the most challenging credit market environment that's faced the housing market in 10 years," said Keith Gumbinger, vice president of HSH.
As of last week, the gap had narrowed to a difference of 0.76 percentage points, with 30-year fixed rate jumbo home loans nationwide averaging 7.22% and conforming loans averaging 6.46%, according to HSH's weekly survey.
While that's an improvement, Gumbinger said, it could take months for the situation to improve.
In some areas, up to 30% of signed contracts fell through in August, said Lawrence Yun, senior economist at the real estate trade group.
"Some creditworthy people are trying to buy homes but can't," Yun said in a prepared statement.
The Realtors' index is based on a sample representing about 20% of existing home sales nationwide.
Last week the group said that sales of existing single-family homes dropped 4.3% in August to the lowest point in five years. Sales dropped to 5.5 million units that month, the slowest pace since August 2002.
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Print | posted on Tuesday, October 02, 2007 11:10 AM