April pending homes sales down 26.5% from year earlier

Pending home sales fell substantially in April with unusual weather and continued economic softness hindering a recovery in the housing market, according to the National Association of Realtors. The large trade association, which has more than 1.2 million members, said its pending home sales index, which is based on contracts signed, decreased 11.6% to 81.9 for April from a downwardly revised 92.6 for March. NAR said the index is 26.5% lower than 111.5 for the year-earlier April, when homebuyers where rushing to qualify for the expiring federal tax credit. NAR chief economist Lawrence Yun attributed the decline to temporary factors, although tightened lending standards “is the primary long-term factor holding back the market.” In late April, after reporting the pending home sales index rose 5.1% in March on top of a 2.1% gain the prior month, Yun said “the market is recovering on its own.” But other economic indicators continue to weigh down housing. “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,” Yun said. “The pullback in contract signings is disappointing and implies a slower-than-expected market recovery in upcoming months. 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.” The NAR pending home sales index rose 1.7% in the Northeast in April, while falling in all other parts of the country. In the South, pending sales fell 17.2% from March with a 10.4% drop in the Midwest and an 8.9% decline in the West. The April pending homes sales index in the Northeast was 33.4% lower than a year earlier. In the Midwest, the index fell 30.2% below year-ago levels, and the South experienced a 27% drop from April 2010 with the index down 17% in the West. “Even with very favorable affordability conditions, job growth and a pent-up demand from abnormally low household formation during the past three years, the recovery will continue to be uneven and sluggish given the ongoing credit constraints,” Yun said. Write to Jason Philyaw.