Pending home sales drop
The number of pending home sales dropped 4.6% nationwide in September after a big increase the previous month, possibly indicating that the credit crisis has choked a small revival in sales driven by ever-shrinking prices, a real estate business group said Friday.
The National Assn. of Realtors said that despite the sharp reduction in pending sales for existing homes from August to September, sales agreements are up from September of last year by 1.6%.
Several Western states are doing slightly better than the national average. In the region that includes California, Utah, Oregon and Washington, pending sales in September rose 3.7% over August.
Realtors and economists attribute the September drop to the sinking stock market, which led many potential buyers to stall on home purchases. The credit crisis has also made it harder and more time-consuming for buyers to get loans.
“It’s harder to get financing now than it was a year ago,” said Richard Green, director of USC’s Lusk Center for Real Estate. “You need a 20% down payment. A year ago, it was less than 5%.”
Potential home buyers are also less willing to buy now because of high unemployment rates, Green said.
“With people losing their jobs and seeing their neighbors losing their jobs, they’re not going to want to make the commitment of buying a house,” he said. “You’re putting yourself on a hook for a long time.”
The U.S. unemployment rate reached 6.5%, a 14-year high, in October.
Lawrence Yun, chief economist for the National Assn. of Realtors, said that despite the national drop in pending transactions, sales are higher than this time last year.
“The month-to-month weakening in pending home sales is understandable, but because the index remains above year-ago levels, it means we’re still in a broad period of stabilization,” Yun said.
The association did not release specific figures on the pending sales -- which include but are not limited to houses in escrow -- but instead calculated the percentage of increase or decrease by using a formula that it calls its pending sales index.
Paul Bishop, senior economist and managing director of research for the association, credited the increase in sales in Western states with low prices that spurred purchases.
“We’ve seen a strong increase in the number of homes sold in Southern California, Phoenix and Las Vegas,” Bishop said. “Home prices in those areas dropped significantly -- 20% to 40% in some cases -- and that has dramatically improved affordability.”
Real estate in California is selling faster because much of it is bank-owned property that is priced low to sell, Green said. Banks are selling homes below market value, and people are taking advantage of lower prices, he said.
Rosalie Klein, a Realtor at Prudential in West Hollywood, said the stock market drop in September led some clients to back out of buying homes, especially cash buyers and foreign buyers.
“There was a lot of fear,” she said. “A lot of people who had cash . . . their portfolios shrank tremendously, and everybody had financial advisors advising them to cancel the deal because their portfolio shrank.”
The collapse of the Asian and European markets also made foreign buyers more reluctant to buy, Klein said. “Those buyers also took one step back to wait and see what was going to happen,” she said.
It’s unclear when the housing market will rebound, Green said. “It’s going to get better,” he said. “Exactly when that’s going to happen is hard to say right now.”
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