As expected, pending home sales fell in September as the economy continued to deteriorate, according to data released Friday by the National Association of Realtors. After an encouraging gain in August, the pending home sales index declined 4.6 percent in September to a reading of 89.2. The index is a forward-looking economic indicator based on contracts signed for the purchase of existing homes during the month.
In a bit of good news, the index is 1.6 percent higher than it was in September 2007. It was the second month in a row that pending sales have risen on a year-over-year basis.

“The month-to-month weakening in pending home sales is understandable,” NAR chief economist Lawrence Yun said in a statement, “but because the index remains above year-ago levels, it means we’re still in a broad period of stabilization.”

Regionally, the index showed mixed results. In the West, the index rose 3.7 percent compared to the previous month to 113.6. It remained essentially unchanged at 83.3 in the Midwest. The index fell, however, 7.9 percent month-over-month to 83.3 in the South. In the Northeast, it slid 16.8 percent on a monthly basis to a reading of 66.4.  

Yun projects contraction in the U.S. gross domestic product for the fourth quarter of 2008 and the first quarter of 2009.

“Right now, we’re in a recession,” he said, “and unemployment will increase through 2009. … The depth of the recession depends entirely on housing--with sufficient housing stimulus, the recession will be shallow. If actions stay focused on housing, the cost to the Treasury would be much less than the potential losses in the nation’s output and income in a severe recession.”

Pat Curry is senior editor, sales and marketing, at BUILDER magazine.