Pending sales dropped 6.5% to a record low in August, according to the National Association of Realtors. The drop was larger than forecast, and reflects stricter lending practices, higher borrowing costs, and low mortgage availability, especially for the so-called jumbo loans or loans for more than $417,000 which are not guaranteed by Government-chartered enterprises Fannie Mae and Freddie Mac. Pending home sales were down 22% year-over-year.
Pending sales are an indicator of future activity, so the August results could mean that September and October home sales will be lower as well. Although banks are seeing signs of improvement in credit markets, problems in the housing sector are far from over, which may prompt the Fed to cut interest rates again before the end of this year. The next Fed meeting is at the end of October.
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