Pending Home Sales Post Record Plunge in November

Pending home sales unexpectedly plunged in November, according to a report issued Tuesday by the National Association of Realtors, posting their largest drop on record after several months of positive gains for a closely-watched indicator of housing market activity.

According to the industry group, November pending home sales activity dropped by 16% to a reading of 96.0, compared with the previous month’s reading of 114.3. The drop was much larger than expected by Wall Street, which was looking for a dip of 2% for the indicator for November.

It was the largest drop, point-wise, since the industry group started the index in 2001, dragging the indicator to its lowest level since June.

NAR officials said the drop was related to a decrease in sales activity as the original Dec. 1 deadline for the first-time home-buyers tax credit approached. Pending home sales are contracts signed, meaning it could take several months for a home buyer to finance and finish the transaction. A November home buyer may have been too late to qualify for the original deadline.

The U.S. government extended in November the $8,000 tax credit to a new deadline of April 30, in response to industry and consumer pressure. Housing market sales have risen 15.5% from a year ago, which many believe is primarily related to the tax credit.

Lawrence Yun, NAR’s chief economist, said activity was expected to slow in the winter but he expects it to pick up again as the new April deadline approaches.

“The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own,” Yun said in a statement. “We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”

Regionally, the pending home sales plunged 25.7% in the Northeast, but remain up 14.7% from the same period a year ago. In the Midwest, sales dropped 25.7% but remain higher by 9.2% from 2009, while sales in the South dropped 15% and remain up 14.7% from a year ago. Sales in the closely watched Western region of the country declined slightly, by 2.7%, and remain higher by 21.4% from 2008.

By Ken Sweet
FOXBusiness