Index of Pre-Owned Homes Under Contract Drops After Earlier Gains

Pending sales of existing homes â€" which in recent months have been nearly 40 percent comprised of REO and short sale properties â€" slipped much further than the market was expecting in April, signaling a feeble start to what typically would be the strongest home buying season of the year.
[IMAGE] The ""National Association of Realtors"":http://www.realtor.org (NAR) reported Friday that following fairly commendable gains in February and March, its pending sales index dropped 11.6 percent in April.

According to _Reuters_, economists had been expecting a decline, but significantly smaller at around 1 percent.

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NAR's gauge of pending home sales reflects signed contracts for the purchase of previously owned homes ahead of the actual closing, which normally occurs with a lag time of one to two months.

Lawrence Yun, NAR’s chief economist, said the dip in contracts may be due to temporary factors.

“The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” Yun said. “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.”

Yun added, “Nonetheless, the magnitude of the fall in pending home sales is larger than can be implied by broad economic factors, so we need to see if it’s just a one-month aberration.”

The only region to post an increase in pending home sales last month was the Northeast, according to NAR’s study. There, the index was up 1.7 percent compared to March.

Pending sales in the Midwest fell 10.4 percent. In the South they dropped 17.2 percent, and in the West the index declined 8.9 percent.