WASHINGTON (10/29/13)--A measurement of future home sales dropped to a three-year low in September, plunging far below economists' predictions.
The National Association of Realtors' index of impending home sales was down 5.6% in September--the biggest one month drop since a 28.9% drop in May 2010 occurred after the extension of a federal tax credit expired.
The median forecast of 39 economists surveyed by Bloomberg predicted the measure would be unchanged from the month before, when it decreased by 1.6% (Bloomberg.com Oct. 28). Moody's predicted that the gauge would increase by 0.7% (Moody's Economy.com Oct. 28).
The measure has now decreased for four consecutive months. In August, it fell by 1.6%.
The decline in September also represented an annual decrease of 1.2%, the first month in more than two years that pending sales were lower on a year-to-year basis (Marketwatch Oct. 28).
In terms of regional change, the index of pending home sales dropped by 9.6% in the Northeast, 9% in the West, 8.3% in the Midwest, and 0.4% in the South (Moody's Economy.com).
Despite weak demand, the median housing price of an existing home increased to $199,200 from $178,300, according to data released by NAR last week (Market News Oct. 22).
The group also predicted that existing home sales in 2014 will increase slightly to 5.18 million, from the 5.16 million it has forecasted for 2013.
The government shutdown, and uncertainty over congressional budget negotiations in the new year, will likely keep the pending home sales index down in October. The Mortgage Bankers Association said that purchase applications for government programs were down by more than 7% in early October--its lowest level since December 2007.
The mortgage industry trade association also reported that the government share of purchase applications was at its lowest level in three years, and that the MBA Purchase Index declined by 4.8% for the week ending Oct. 11 (Market News Oct. 17).