Pending home sales drop in September

Potential homebuyers signed fewer contracts in September, the third straight month of drops as the housing market languishes in the doldrums. 

The National Association of Realtors said Wednesday that its index of sales agreements fell to a reading of 84.5 last month, down 4.6 percent from its August reading of 88.6.

Still, signings were 6.4 percent higher than in September 2010, when the reading stood at 79.4. The data reflect contracts but not closings.

“A combination of weak consumer confidence and continuing tight-lending criteria held back home buyers, even though the private sector added nearly 2 million net new jobs in the past 12 months,” said Lawrence Yun, NAR chief economist.

The last time the index hit a healthy reading — considered 100 — was April 2010, the final month in which buyers could qualify for a federal home-buyer tax credit that has since expired.

Contract signings provide insight into the sector’s direction, with a delay of a couple of months or so between signing and closing. 

Historically low mortgage rates — around 4 percent — haven’t provided the market with a much-needed boost, as nearly 25 percent of homeowners owe more than their homes are worth, lenders are requiring higher down payments and contracts are being canceled because houses are being appraised at less than their sales amounts. 

Yun also emphasized the need to reinstate higher loan limits in 42 states. 

“Just leaving excessive cash to sit in banks and not work into the economy is a drag on the overall recovery,” he said. “We need a comprehensive approach to address housing issues — not additional impediments.”