A National Association of Realtors index that measures pending sales of previously owned homes dived 21.5 percent in August compared to the same month last year and fell below the previous record reached in September 2001.
The Pending Home Sales Index, which is based on contracts signed in real estate purchase transactions that have not yet closed, fell 27.1 percent in the West, 21.3 percent in the South, 18.3 percent in the Northeast and 18 percent in the Midwest in August compared to August 2006.
A sale is typically finalized within two months of a signed contract, so the index is considered a leading indicator for future sales of existing homes.
The index is based on a large national sample that typically represents about 20 percent of resale transactions.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined in the index and the first of five consecutive record years for existing-home sales. The index rating was 85.5 in August, compared with 91.4 in July and 108.9 in August 2006. The August index was the lowest in the history of the index, which tracks pending sales back to January 2001. The previous low was 89.8 in September 2001.
Lawrence Yun, NAR senior economist, said in a statement, “Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments. The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.
“The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August,” Yun stated, and “jumbo loan rates are still higher than they would be under normal conditions.”