Pending Home Sales Drop, Market Looks Bleak

The National Association of Realtors’ index on pending home sales dropped by 16% in November.  This is more than three times what economists expected to see.  The pending home sales index showed a decline in every region, 26% in the northeast and mid-west, 15% in the south and 3% in the west.

The drop-off was initiated by the rush for pending home sales in October when buyers were frantically trying to complete their home purchase before the first time home buyer tax credit expired.  The tax credit was extended, making the rush to complete a home purchase unnecessary.

A New York Times editorial noted, “The situation we fear will only get worse in months to come”.  The reason: increased mortgage rates, some analyst predict double digit mortgage rates by the end of 2010, the ending of the first time home buyer tax credit which is not scheduled to be extended a second time and the anticipated deluge of foreclosed homes.

According to Moody’s Economy.com, more than 1.7 million mortgages fell into foreclosure in 2008.  In 2009 that number grew to 2 million, this  number is expected to increase to 2.4 million in 2010.

The tide of new foreclosures will only force home values to sink, some predicting by as much as 10% over the next year.  Moody’s estimates that one third of all U.S. homeowners, 16 million total, are now ‘underwater’ in their mortgage loans.

Related posts:

1. First Time Home Buyer Tax Credit Deadline Looms
2. Mortgage Rates Drop as Unemployment Rises
3. Existing Home Sales Decline
4. ‘Seasonality Disorder’ In The Housing Market?
5. Is The Canadian Housing Market Sustainable?

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