The number of contracts entered into for existing U.S. homes fell 4.7 percent in May, dashing any hopes of a short-term housing recovery that had been created by a jump in pending home sales during April. On Tuesday, the National Association of Realtors said its pending home sales index, a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below the level recorded one year earlier. The drop in May’s contract totals outpaced economists’ expectations, which had pegged the index to fall 3 percent; the large drop — even after a strong upward revision to April’s contract totals — clearly added to Wall Street’s already-dour mood in the financial sector. One month after touting that “bargain hunters have entered the market en masse,” NAR economist Lawrence Yun was forced to reverse course Tuesday morning. “The overall decline in contract signings suggests we are not out of the woods by any means,” he said in a press statement. Yun suggested that a housing bill creeping through Congress represented “critical” aid for housing. NAR president Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., actually went so far as to play the fear card — yes, really — saying that buyers looking to get into a house should do so before inflation takes off. “Home buyers are getting a great deal right now,” he said. “Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009.” Revised assumptions, new housing in a freefall Most noteworthy in the NAR report, however, was a wholesale change in expectations for new housing sales transactions going forward. The realtor-led group now expects new housing sales to decline both this year and the next; just one month ago, the NAR had predicted a 12.5 percent rebound in new housing during 2009. On Tuesday, the NAR revised that projection and said that new home sales are likely to fall 32.3 percent to 525,000 in 2008, and decline another 3.4 percent next year to 507,000. The group had earlier predicted new homes sales of 595,000 for 2009 in June’s forecast. “In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into 2009,” Yun said. New homes, however, weren’t the only victim of the NAR’s ever-downward creep in projections. Existing home sales are now expected to register just 5.31 million during 2008, down from last month’s forecast of 5.40 million. The realtors’ expectations for 2009 have become similarly more bearish — the organization said it now sees 2009 existing home sales at just 5.58 million, after projecting a rate of 5.74 million last month. All of which points to a housing market that is looking less and less likely to recover in the short term, even into 2009. For more information, visit http://www.realtor.org. Worth noting: In June, the NAR press statement read “Home Sales May Rise Modestly Before Broader Upturn in Second Half Of 2008” ….. Tuesday’s press statement ran the headline “Home Sales to Vary in Narrow Range, Then Rise in Second Half” …. is it possible that next month’s headline could be “Home Sales Remain Constrained, But Will Rise Before End of Fourth Quarter, We Promise”?