The Pending Home Sales Index, which is used by experts as a forecaster for home sales, dropped 4.6% in September. The numbers are an improvement on September 2010, but home sales continue to struggle due to a lack of consumer confidence and strict lending limitations. Experts with the National Association of Realtors believe the direction of current U.S. policy in the housing market is stifling potential growth by capping loan amounts and so forcing people with good credit to accept higher interest rates on jumbo loans. For more on this continue reading the following article from Property Wire.
Pending residential property sales in the United States declined in September, although activity remains above a year ago, according to the latest report from the National Association of Realtors.
Its Pending Home Sales Index, a forward looking indicator based on contract signings, fell 4.6% to 84.5 in September from 88.6 in August but is 6.4% higher than September 2010 when it stood at 79.4.
It means that the housing market is being excessively constrained, according to Lawrence Yun, NAR chief economist.
‘A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly two million net new jobs in the past 12 months,’ he said.
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The PHSI in the Northeast declined 4.7% to 60.6 in September but is 4% above a year ago. In the Midwest the index dropped 6.2% to 71.5 in September but remains 12.3% higher than September 2010.
Pending home sales in the South fell 5.5% in September to an index of 91.6 but are 5% above a year ago. In the West the index declined 2.1% to 105.8 in September but is 5.6% higher than September 2010.
‘America’s monetary policy is contradictory and confusing, where some consumers with the best financial capacity and top-notch credit scores pay higher mortgage interest rates. The Federal Reserve evidently has been attempting to lower mortgage rates, yet more consumers are faced with taking out jumbo loans that carry higher interest rates,’ Yun explained.
Yun 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. We need a comprehensive approach to address housing issues, not additional impediments,’ he added.
This article was republished with permission from Property Wire.