Pending Home Sales Show Steep Drop In November

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Tuesday morning, the National Association of Realtors released its report on pending home sales in the month of November, showing that pending home sales fell by much more than expected after a surge of activity in recent months.

NAR said its pending home sales index fell by 16.0 percent to 96.0 from an upwardly revised 114.3 in October. Economists had been expecting a much more modest decrease of about 2.0 percent.

A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The steep drop in pending home sales came after notable increases in recent months, when homebuyers rushed to beat the original deadline for the first-time home buyer tax credit.

While the first-time homebuyer tax credit had originally been due to expire at the end of November, President Barack Obama signed a bill that extended and expanded the tax credit.

The bill extends the $8,000 first-time homebuyer tax credit through April 30, 2010 and expands it to include a $6,500 credit for people who have lived in their current homes for at least five years.

Paul Dales, U.S. economist at Capital Economics, said, "The index suggests that existing home sales will fall back from November's 6.54 million to around 5.40 million in December."

"That would reverse the gains of the previous three months, but still leave sales some 20% above the low point seen at the start of 2009," he added.

Pending home sales fell in all four regions of the country, with pending sales in both the Northeast and the Midwest falling by 25.7 percent. In the South, pending home sales by 15.0 percent, while pending sales in the West showed a more modest 2.7 percent drop.

Noting that a drop in pending sales was expected, Lawrence Yun, NAR chief economist, said, "It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit."

Yun predicted that an additional 900,000 first-time buyers will qualify for the extended tax credit in addition to about 2 million who have already purchased. 1.5 million repeat buyers also are expected to benefit from the credit, he added.

Tuesday morning, the National Association of Realtors released its report on pending home sales in the month of November, showing that pending home sales fell by much more than expected after a surge of activity in recent months. NAR said its pending home sales index fell by 16.0 percent to 96.0 from an upwardly revised 114.3 in October. Economists had been expecting a much more modest decrease of about 2.0 percent. (Market News Provided by RTTNews)