The battered housing sector took another blow Tuesday, with an industry group reporting that a gauge of pending home sales tumbled to its lowest level ever as the credit crunch restrains purchases.
The National Association of Realtors' index for pending sales of previously owned homes decreased at a seasonally adjusted annual rate of 6.5% to 85.5 in August from July's 91.4, the industry group said. The August index was at its lowest point since tracking began in January 2001. The previous low was 89.8 in September 2001.
NAR senior economist Lawrence Yun said the troubled mortgage market hurt sales.
"Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10% of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments," he said.
The NAR index, based on signed contracts for previously owned homes, was 21.5% below the level of August 2006.
"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," Mr. Yun said.
The impact was greater in high-cost markets more dependent on jumbo mortgages, he said.
"In some areas, as much as 30% of signed contracts were falling through in August when the credit crunch problem peaked," Mr. Yun said. "The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions. Therefore, sales activity in late fall will better reflect market fundamentals."
The NAR's pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.
By region, the Northeast decreased 8.3% in August from July; it fell 18.3% from August 2006. The Midwest fell 2.9% in August from July; it fell 18.0% since August 2006. The South decreased 9.5% in August from July; it dropped 21.3% since August 2006. The West declined 2.7% in August from July; it tumbled 27.1% since August 2006.
