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REALTOR®: Pending Home Sales Index falls, but Realtor officials indicate problems are temporary

Monday, September 10, 2007

The National Association of Realtors® (NAR) reports pending sales of existing homes fell 12.2 percent in July and attributes much of the decline to the rise in foreclosure activity, tighter mortgage lending standards and mortgages falling through at the last moment.

The Pending Home Sales Index, based on contracts signed in July, fell to a reading of 89.9, the lowest since September 2001 when the index stood at 89.8. 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.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

“It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” said Lawrence Yun, NAR senior economist.

Yun called the problems "temporary," and related them to jumbo home loans and continuing issues for subprime borrowers, but he noted, “There are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.”

“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun said.

Despite the negative news about the housing and mortgage lending markets, San Mateo County Association of Realtors® President Geoffrey Craighead said, “It’s still a good time to buy a home; the market is not bad if you’re not a subprime borrower.

“In fact, if you have a sold credit history – a good credit score, a good, steady income and money for a down payment, you should have no worries,” said Craighead. “Real estate should be considered a long-term investment, and for serious buyers looking for a house to live in for the long-term, now is a good time to buy.”

The PHSI in the South declined 6.6 percent in July to 104.0 and was 15.2 percent below a year ago. In the Northeast, the index fell 12.2 percent from June to 84.3 and is 10.0 percent lower than July 2006. The index in the Midwest dropped 13.1 percent in July to 80.4 and was 15.8 percent below a year ago. In the West, the index fell 20.8 percent in July to 82.3 and was 21.8 percent below July 2006.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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