Faint signs that the US housing recession may have been founding a bottom over the past few months were downed out by yet another drop in pending home sales - one of the broadest gauges of sales activity in the sector. According to the National Association of Realtors’ report, signed contracts for purchasing previously owned homes dropped 4.7 percent through May. This was the sharpest drop in nine months for this statistical series; but the level of the decline isn’t much of a surprise considering the previous reading recorded the biggest jump in sales since October of 2001. From the same period a year ago, activity has fell 14.6 percent. Looking into the details of the indicator, all four regions reporeted falling sales levels. The South offered the biggest contraction at 7.1 percent, followed by the 6.0 percent decline in the Midwest, the 2.9 percent dip in the Northeast and 1.3 percent fall in the West.
For the broader housing market, this indicator confirms concerns that conditions continue to deteriorate. Though the pending home sales report lags in its release time, it records signed contracts which is more inclusive than the existing sales report which only tallies when the purchase is closed. This leading aspect over the existing and new home sales figures confirms fears that rising mortgage rates, stricter lending standards and falling consumer confidence and wealth are stunting a rebound in the worst housing recession in over a quarter century. With consumers seeing their purchasing power erode and prices falling steadily, the eventual improvement in the ailing sector will be pushed further back. - John Kicklighter, Currency Analyst for DailyFX.com