Pending home sales ‘fell off a cliff’

07th July 2010 | Category: General

NEW YORK (CNNMoney.com) — The experts expected home sales to drop
once the homebuyer tax credit lapsed at the end of April, but the depth
of the decrease was shocking.

According to the National
Association of Realtors (NAR), pending home sales fell a whopping 30% in
May. Their index, which measures signed sales contracts but not closed
sales, plunged to 77.6 from 110.9 in April. It’s even off 15.9% from a
year ago when the nation was barely emerging from the recession.

“The
pending home sales report is a disaster,” said Mike Larson, a real
estate analyst for Weiss Research. “Sales fell off a cliff after the tax
credit expired. It’s the biggest monthly decline ever and the index is
at its lowest level since NAR began tracking it in 2001.”

Lawrence
Yun, NAR’s chief economist downplayed the damage a bit. According to
him, customers rushed into deals to claim the credit, borrowing from May
sales. Once the economic recovery comes into full swing, housing
markets will heat up.

“If jobs come back as expected, the pace of
home sales should pick up later this year,” said Yun, “and reach a
sustainable level of activity given very favorable affordability
conditions.”

Those conditions include much lower home prices and
extremely favorable mortgage interest rates. The question is when — or
if — the job market will ever bounce back.

“We’re not creating
jobs,” said Larson. “The housing problems now are being driven by broad
economic problems.”