Mortgage disruptions are continuing to "impact the housing market" according to the National Association of Realtors (NAR), and those disruptions have directly impacted the NAR Pending Home Sales Index. The indicator, which is based on pending sales of existing homes, fell 6.5 percent to a reading of 85.5 from an upwardly revised 91.4 in July, based on contracts signed in August. In addition, the index is 21.5 percent below the August 2006 index of 108.9.

The Pending Home Sales Index is designed to predict sales levels for the following two months. August's reading of 85.5 was below analysts' expectations and the lowest ever for the index, which started in January 2001. The previous low of 89.8 occurred in September 2001, when the events of 9/11 shook buyer confidence.

In a statement released Tuesday, Lawrence Yun, NAR senior economist, said the mortgage market impact is quantifiable. "August's pending sales were down because of a severe credit market crunch," Yun told BUILDER Online. "The September existing-homes sales and possibly October existing-homes sales will be artificially depressed given the low pending sales."

Despite a record low for the index, Yun says he anticipates the index to gain some strength in the coming months. "We have seen the credit market loosen up in September and [expect it to get a little better in October]," Yun said. "The jumbo loans are still pricey but not as pricey as before so at least things are moving in the right direction."

"Once we begin to see the figures for November and December, I think things will return to the fundamentals without the artificial depression. Things will be better then," he concluded.

Regionally, the index was down 2.7 percent in the West for August to 80.3 and was 27.1 percent below a year ago. In the Midwest, the index fell 2.9 percent from July to 78.1 and is 18.0 percent lower than August 2006. The index in the Northeast fell 8.3 percent in August to 77.3 and was 18.3 percent below a year ago. And in the South, the index dropped 9.5 percent in August to 97.8 and was 21.3 percent below August 2006.