The National Association of Realtors reported the organization's annual convention in Orlando Friday morning that its Pending Home Sales Index, a forward looking indicator of existing home sales, fell 4.6% to 89.2 from an upwardly revised reading of 93.5 in August. The index, however, remained 1.6% above its level of 87.8 posted in September of 2007.
"The month-to-month weakening in pending home sales is understandable, but because the index remains above year-ago levels it means we¹re still in a broad period of stabilization," said Lawrence Yun, NAR chief economist. "Conditions remain mixed around the country, but markets that are showing annual sales gains include Long Island, N.Y.; Boston; Minneapolis; Denver and Washington, D.C., in addition to consistent solid gains in California and Florida."
Yun pointed out that the index has remained above year ago levels for two consecutive months. However, given anecdotal evidence from new home builders that October brought that market to a near halt, the October PHSI, which will be released next month, could fall further.
Regionally, the PHSI in the West was the only month-to-month gainer, up 3.7% to 113.6 , 39.5% above a year ago. The Midwest fell 0.7% to 83.3, 3.1% below September 2007. The South fell 7.9% to 89.0, 11.3% below a year ago. The Northeast dropped 16.8% to 66.4 and is 9.4 percent below September 2007.
"Right now we're in a recession and unemployment will increase through 2009," said Yun. "Consumer spending has halted and businesses are very cautious of expanding. "The depth of the recession depends entirely on housing--with sufficient housing stimulus, the recession will be shallow.If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation¹s output and income in a severe recession."
The NAR is now forecasting existing-home sales are expected to total 5.02 million in 2008, rising to 5.32 million next year and 5.62 million in 2010. For all of 2008, home prices will have fallen by more than 20% in Las Vegas, Phoenix, and many California and Florida markets. Wide variations in home price movements will continue in 2009, with Houston and Denver likely to see respectable price gains while most other markets experience no notable change.
New-home sales are likely to total 487,000 this year and 413,000 in 2009 before rising to 520,000 in 2010, the NAR predicts. Housing starts, including multifamily units, will total 936,000 units in 2008 and 781,000 next year, then increase to 886,000 in 2010.