Lending Restrictions Inhibit Forward-Thinking Indicator

The results of last month’s pending home sales report come as no surprise, and there are even a couple bright sides.
real estate purchase contract and a penThe Pending Home Sales Index, which predicts future home-buying activity around the country because it’s based on contract signings not closings, dropped 1.2 percent in August, the National Association of REALTORS reported Thursday.
The bright sides? One region brought the index down due to weather, and the entire country is faring better than last year.
The index dropped from 89.7 in July to 88.6 in August but is 7.7 percent above the 82.3 it stood at in August 2010.
“The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” said Lawrence Yun, NAR chief economist. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”
Pending home sales throughout the country’s four regions in August:
*Even though the Northeast declined 5.8 percent last month, the region is still 1.3 percent better than August 2010.
*The Midwest index dropped 3.7 percent in August but is 8.2 percent above a year ago.
*The West fell 2.4 percent but is 10.5 percent ahead of last year.
*The South saw a 2.6 percent increase in pending home sales and is 7.6 percent better than the same month last year.
mortgage papers with words loan denied on them.Even though our country sits better than last year, there are still unnecessary hurdles holding back a true housing recovery.
“We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit — a factor in elevated levels of contract failures,” said Yun.
“Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”