The Pending Home Sales Index, a forward looking indicator, fell 6.5 percent to a reading of 85.5 from an uipwardly revised 91.4 in July, based on contracts signed in August. It was 21.5 percent below the August 2006 index of 108.9.
Lawrence Yun, NAR senior economist, said the mortgage market impact is quantifiable. 'Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments', he said. 'The volume of activity we are seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can not because of the credit crunch.
'The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked,' Yun said'. 'The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions. Therefore, sales activity in late fall will better reflect market fundamentals.'
The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Annual changes in the index are more closely related to actual market performance than are month to month comparisons. As the relatively new index matures and seasonal adjustent factors are refinded, the month to month comparisons will become more meaningful.
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