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Index that measures contracts being signed for existing home sales drops to lowest level since 9/11 attack. NEW YORK -- The meltdown in the mortgage market caused the biggest drop on record in July for pending home sales, taking the index down to the lowest level since the month that included the Sept. 11, 2001 terrorist attack. The National Association of Realtors' pending home sales index, which measures contracts to buy existing homes, fell 12.2 percent to a reading of 89.9. It the second lowest reading on record for the seven-year old index, trailing only the 89.8 reading in September 2001. "There's bad reports and then there's truly awful ones. This is clearly the latter," said Mike Larson, real estate analyst for independent research firm Weiss Research. "Even I'm shocked by a 12 percent decline."
Realtors' spokesman Walter Molony said the large drop isn't a surprise, given that the problems in the mortgage markets seen in July and August were the biggest disruption to the home buying market since 9/11. "It's difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren't closing because mortgage commitments have been falling through at the last moment," said Lawrence Yun, the Realtors' senior economist, in the index report. The months of July and August saw rising delinquencies and defaults cause problems in the sale of mortgage backed securities. In August Countrywide Financial, the nation's leading mortgage lender, had to tighten its underwriting standards and drastically cut back many types of loans used by borrowers with less than top credit or those needing loans of greater than $417,000. Other lenders pulled out of the mortgage market altogether. Larson said the fact that the mortgage market went from bad to worse from July to August suggests that the next pending home sales report could be worse still. "We have these issues with mortgage credit that started to hit in July, but they gathered steam into August," he said. "This housing downturn is not just a one-month event." The pending home index is more forward looking than the group's existing home sales report, which measures home sales at the time a deal is closed, typically a month or two after a sales contract is signed. The pending home sales index does not include any information on prices, but the sharp drop in sales activity suggests that price declines measured before August could get worse due to lack of buyers. |
