The number of contracts entered into for existing U.S. homes fell 4.7 percent in May, dashing any hopes of a short-term housing recovery that had been created by a jump in pending home sales during April. On Tuesday, the National Association of Realtors said its pending home sales index, a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below the level recorded one year earlier.
The drop in May’s contract totals outpaced economists’ expectations, which had pegged the index to fall 3 percent; the large drop — even after a strong upward revision to April’s contract totals — clearly added to Wall Street’s already-dour mood in the financial sector.
One month after touting that “bargain hunters have entered the market en masse,” NAR economist Lawrence Yun was forced to reverse course Tuesday morning.“The overall decline in contract signings suggests we are not out of the woods by any means,” he said in a press statement.
Revised assumptions, new housing in a freefall
Most noteworthy in the NAR report, however, was a wholesale change in expectations for new housing sales transactions going forward. The realtor-led group now expects new housing sales to decline both this year and the next; just one month ago, the NAR had predicted a 12.5 percent rebound in new housing during 2009.
On Tuesday, the NAR revised that projection and said that new home sales are likely to fall 32.3 percent to 525,000 in 2008, and decline another 3.4 percent next year to 507,000. The group had earlier predicted new homes sales of 595,000 for 2009 in June’s forecast.
Poor Lawrence Yun, it must be hard to be an optimist when you ship is going down like the Titanic.