Fewer homebuyers signed contracts for home purchases over July, casting the housing recovery as one still in flux for pending home sales. The ""National Association of Realtors"":http://www.realtor.org/ (NAR) released an index Monday that found signed contracts falling off from June, with a 1.3-percent decline from 90.9 recorded that month.[IMAGE]
NAR reported the information it found in the ""Pending Home Sales Index"":http://www.realtor.org/press_room/news_releases/2011/08/phs_july, a monthly listing of signed contracts, which it compiles by pooling information for contracts that have not closed. According to the index, overall signed contracts dipped to 89.7 in July, remaining 14.4 percent over a weak 78.4 recorded by the index for the same month last year.
Regionally, only the West showed signs of health, with pending home sales going up 3.6 percent to crest at 110.8 over July. The other regions reflected declines in contracts for new homes, with figures for New England falling by 2 percent to hit 67.5 over the month, still 9.7 percent above figures recorded last year.
The Rust Belt fared marginally better, finding that contracts opened by Midwesterners dipped by 0.8 percent to 79.1, still remaining 18.8 percent above data from last year. Pending home sales in the South failed to rise again, with contracts slipping by 4.8 percent to hit 94.4, still 9.5 percent more than figures reported last year.[COLUMN_BREAK]
In a statement, Lawrence Yun, chief economist with NAR, described sales activity as underperforming by normal standards.
""The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,"" he said. ""We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.""
Yun added that ""contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April. The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge.
""It is now a question of lending standards and consumers having the necessary confidence to enter the market,"" he said.
Speaking to _MReport_ for a past story, Walter Molony, a spokesperson with NAR, underscored the role played by wobbly appraisals and still-tight underwriting standards in cancelled contracts.
""It's hard to imagine a better time affordability-wise,"" he said, referencing still-low purchases, home prices, and mortgage rates. ""The big monkey wrench is tight credit. Lenders have only been willing to lend to creditworthy buyers.""
Molony cited a NAR report that found 16 percent of all contracts failing somewhere between the initial signature and closing. He attributed the hard path for contracts to ""mortgages [falling] apart in the underwriting process when appraisals come back less.""
""_Bloomberg News_"":http://www.bloomberg.com/news/2011-08-29/pending-sales-of-previously-owned-u-s-homes-dropped-in-july.html quotes Ian Shepherdson, a chief U.S. economist with New York-based ""High Frequency Economics"":http://hifreqecon.com/contact.html, as publishing a note that said he felt concerned about ""the chaos in the stock markets,"" which ""might have persuaded a greater proportion of buyers to walk away after signing contracts.""