Pending Home Sales Continue to Fall; NAR Scales Back Projections, Again

Pending sales on existing homes dropped 1.5 percent in December on a monthly comparison basis, suggesting continued weakness in the housing sector. The National Association of Realtors’ pending home sales index registered 85.9 in December, off from a downwardly-revised 87.2 in November, the trade assocation said Thursday.

December’s index was 24.2 percent below the 113.3 recorded in December of 2006.

This month’s reported drop follows a revised 3 percent drop during November — larger than the 2.6 percent originally reported — that had the realtor-led group inexplicably saying at the time that pending sales indicated “broad stabilization” within the housing market. This month, the NAR now says it expects “continuation of soft market conditions,” assumably because evidence of such stabilization has not been forthcoming.

Bloomberg reported that December’s index was — again — worse than economists had predicted; those surveyed by the news organization had expected a median drop of 1 percent on a month-to-month basis.

The Realtors also — again — scaled back their projections for housing sales and prices. Last month, the trade group said it expected existing home sales to total 5.70 million in 2008; this month, that projection was dropped to 5.35 million. Last month, the group said it expected new-home sales to total 669,000 in 2008; this month, that projection was lowered to 637,000. Last month, the NAR said existing-home prices would hold even at a median of $217,600; this month, the NAR said it expects prices to drop to $216,300.

Lawrence Yun, the NAR’s chief economist, remained firm in his assertion that the housing market is being held hostage by poor market conditions.

“Household formation was only half of what it should have been last year given the demographics of a growing population and sustained job growth, so there clearly is a pent-up demand from buyers who are on the sidelines,� he said.

Speaking of jobs, it’s worth noting that the homes data from the NAR coincided with a separate report released Thursday by the Labor Department that found first-time unemployment claims higher than had been anticipated, suggesting that the continued housing slump is negatively affecting job growth.