Pending home sales experienced a dip in April, indicating a slower than expected recovery and a still ailing economy.
According to the National Association of Realtors® Pending Home Sales Index, contract signings fell by 11.6 percent. Last April saw a notable rise in contacts, due to the first time home buyer tax credit, but this year's market is facing a naggingly high unemployment rate and limited access to credit.
Housing contracts weren't the only market sector that slowed in April. Retail sales and furniture/home furnishing sales were down as well.
Yun said tight credit is the primary long-term factor holding back the market. "No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow," he said. "Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves."
Regionally, the South led the way with a 17.2 percent drop in pending home sales. Now, this region is a staggering 27.0 percent below year ago levels. The largest year over year decline, however, was seen in the Northeast, which is down 33.4 percent from last year, but actually was the only region to see an increase, rising 1.7 percent in April.
The Midwest fell 10.4 percent and is 30.2 percent below April 2010. The West fared the best year over year, down only 16.9 percent from April 2010. It was down 8.9 percent from last month.
Lawrence Yun, NAR chief economist, said the dip in contracts may be due to temporary factors. "The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months," he said. "The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims."
"Even with very favorable affordability conditions, job growth and a pent-up demand from abnormally low household formation during the past three years, the recovery will continue to be uneven and sluggish given the ongoing credit constraints," Yun said.