Pending Home Sales Fall In September

The housing market, in desperate need of some good news, didn't get it today. The pending home sales index, a measure of home sale contracts signed, fell 1.8 percent in October, according to the National Association of Realtors.

With the recent confusion over foreclosures, analysts were expecting a decline, but not this much.

According to the Realtors group, the Pending Home Sales Index fell to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. However, the index remains 24.9 percent below the 107.8 recorded in September 2009.

In all fairness, sales were abnormally strong a year ago because first-time buyers were jumping into the market to take advantage of the initial deadline for the tax credit last November. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. The Realtors took the numbers in stride

"Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead, said Lawrence Yun, NAR's chief economist. "Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market.

The PHSI in the Northeast slipped 1.7 percent to 59.6 in September and is 28.3 percent below a year ago. In the Midwest the index fell 5.7 percent in September to 64.2 and remains 33.0 percent below September 2009. Pending home sales in the South declined 3.5 percent to an index of 87.6 and are 19.1 percent below a year ago. In the West the index rose 3.5 percent to 104.6 but is 24.7 percent below September 2009.

Mortgage Rates Starting To Climb

At the same time, there are signs that record low mortgage rates, which has so far failed to ignite a round of home purchasing, are beginning to move up. LendingTree reports its Weekly Mortgage Rate Pulse, a snapshot of the lowest and average mortgage rates available within the LendingTree network of lenders, has moved up for a third straight week.

On November 2, average home loan rates offered by LendingTree network lenders increased week-over-week to 4.37 percent for 30-year fixed mortgages, 3.76 percent  for 15-year fixed mortgages and 3.28 percent  for 5/1 ARMs.

But thanks to the Federal Reserve's just announced Quantitative Easing - the printing of an extra $600 billion to purchase government bonds - mortgage rates could soon start falling again.

"This is good news for borrowers looking to purchase or refinance a home loan as it is expected to keep rates low, said Cameron Findlay, LendingTree's chief economist. "However, the long term erosion of the dollar is probably outweighing the benefit and may have long term negative consequences."