Pending Home Sales Drop 1.8 Percent in September

By Martin Crutsinger | November 5, 2010 | 2:17 PM EDT

Washington (AP) - The number of people who signed contracts to buy homes fell in September after two months of gains.

The National Association of Realtors said Friday that its index of sales agreements for previously occupied homes dropped 1.8 percent in September to a reading of 80.9. Contract signings fell in every region of the country except the West.

The setback highlighted the continued problems facing the housing industry as it struggles to mount a sustained recovery from a deep recession.

The index provides an early measurement of sales activity. There is usually a one- to two-month lag between a sales contract and a completed deal.

A reading of 100 indicates that average level of sales activity in 2001, when the index started. The reading was above the 100 threshhold from March 2003 through April 2007 and then sank as the country fell into a deep recession - a downturn that was led by a bursting of a bubble in housing as sales of new and previously owned homes fell sharply.

With the drop in September, the index stands 25 percent below its level of 107.8 in September 2009, when the index surged due to a home-buyers tax credit. A year ago, first-time buyers were rushing to take advantage of the initial deadline for the credit. Congress moved to extend the credit through April 30 of this year, another deadline that spurred a surge in sales, but then was followed by the latest sales slump.

Lawrence Yun, chief economist for the Realtors, said that some of the weakness in September may reflect disruptions in the housing market caused by the moratoriums on mortgage foreclosures that have been imposed in many parts of the country.

"Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," Yun said.

By region of the country, the pending home sales index slipped 1.7 percent in the Northeast in September compared to the August level and is down 28.3 percent from September 2009. In the Midwest, the index fell 5.7 percent from the previous month and is down 33 percent from a year ago. In the South, the index fell 3.5 percent from a month earlier and is 19.1 percent below the year-ago level.

Only the West saw an increase in pending home sales in September, a rise of 3.5 percent from August. But even with the increase, pending sales were 24.7 percent lower than September 2009.