Pending home sales fall 4.7%

A measurement of pending home sales fell to the third-lowest reading on record in May as the housing market’s recovery continued to prove elusive.

The National Assn. of Realtors’ seasonally adjusted index of pending sales for existing homes fell 4.7% to 84.7 from an upwardly revised April reading of 88.9. The index was 14% below year-earlier levels.

“The overall decline in contract signings suggests we are not out of the woods by any means,” association Chief Economist Lawrence Yun said in a statement.

Home sales are considered pending when the seller has accepted an offer but the deal has not closed. Typically there is a one- to two-month lag before a sale is completed.

Wall Street economists surveyed by Thomson/IFR had predicted the index would come in at 87. The index, which sank to a record low of 83 in March, stood at 98.5 in May 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.

Pending sales fell around the U.S., sinking the most -- 7.1% -- in the South, and the least -- 1.3% -- in the West.

Sales of existing homes edged up in May, indicating that buyers were taking advantage of deeply discounted prices. But many economists believe that prices must drop further before the housing industry can mount a sustained recovery.

The association projects that existing-home sales in the U.S. will fall 6.1% in 2008 to 5.31 million, though the group expects sales to rebound in the second half of the year.

It expects median prices -- the point at which half of the homes sell for less and half for more -- to fall 6.2% to $205,300. It would be the second straight year in which that measurement has fallen nationwide.

Much of the downward pressure on prices comes from foreclosures and so-called short sales, in which a lender accepts an offer that is less than the value of the mortgage.

“The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun said.