May pending home sales plummet, Down 30 percent, Twice as much as forecast

May pending home sales plummet, Down 30 percent

From Bloomberg July 1, 2010.
“The number of contracts to purchase previously owned houses plunged in May by more than twice as much as forecast after a homebuyer tax credit expired.

The index of pending home resales dropped 30 percent from the prior month, figures from the National Association of Realtors showed today in Washington. The drop was the biggest in records dating to 2001 and compared with a 14 percent decrease forecast in a Bloomberg News survey of economists.

The decline shows that the industry at the center of the financial crisis remains vulnerable in the absence of government support. A stabilization in housing will depend on gains in incomes and employment that may stem foreclosures and give Americans the confidence to start buying again.

“Demand will be pretty depressed in the next few months,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “We’re still going to have a big overhang of foreclosures. There’s potential for prices to slow down a lot more.”

Forecasts for the decline ranged from 4 percent to 25 percent, according to a Bloomberg News survey of 36 economists. Sales rose 6 percent in April.

All four regions saw decreases in May, today’s report showed, led by a 33 percent plunge in the South. Sales also fell 32 percent in both the Midwest and Northeast and 21 percent in the West.

Compared with May 2009, nationwide pending sales were down 16 percent.

The tax credit, worth as much as $8,000, helped fuel a rebound in demand last year and was extended and expanded in November. The credit required buyers to sign contracts by the end of April and close by June 30. The House of Representatives voted this week to push back the deadline for closing to Sept. 30.”

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