Pending Home Sales Fall in January, Further Deterioration Expected

Following a surge in activity at the end of 2009, pending home sales dropped in January, and due to abnormal weather conditions this winter, additional declines are anticipated in the coming months, the ""National Association of Realtors"":http://www.realtor.org/ said Thursday.

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NAR's Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in January, tumbled 7.6 percent to 90.4, down from an upwardly revised 97.8 in December. However, the PHSI remained 12.3 percent higher than January 2009 when it was 80.5.

""January pending sales, though still higher than one year ago, remain much lower than expected given that a large

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number of potential buyers are eligible for the expanded home buyer tax credit,"" said Lawrence Yun, NAR chief economist. ""Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the United States, hampered shopping activity in February.""

January's PHSI varied from region to region. In the Northeast, the PHSI fell 8.7 percent from December but was 20.5 percent higher than January 2009. The index in the Midwest dropped 8.9 percent from month-to-month but was 11.8 percent higher year-over-year. In the South, the PHSI slipped 2.1 percent from December but was 18 percent greater than January of last year. In addition, pending home sales in the West plummeted 13.2 percent from the prior month but were 1.2 percent above year-ago levels.

Looking ahead, Yun said there will be weak near-term sales followed by a likely surge of existing-home sales in April, May, and June, due to the deadline of the tax credit. The real question, he said, is what will happen in the second half of the year.

""If there is sufficient job creation, housing can become self-sustaining with stable to modestly-rising home prices because inventory has been trending downward,"" Yun said.