Pending Home Sales Fall to New Lows

The National Association of Realtors' Pending Home Sales report for November--released Tuesday--was a real downer, even by housing crisis standards:

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.

So why were the figures so low? Mike Larson, of Weiss Research, can think of a few reasons:

"If you think back to what was going on in October and November: we were dealing with an economic recession, rising unemployment, consumer confidence was falling, lending standards had gotten tighter, then of course, the worst financial market turmoil to date really was in the September-October-November time frame. I think that clearly when people read the headlines, they saw that companies were firing, they may have unfortunately been laid off at their own job, the drumbeat of news about house prices falling--not a lot that exactly instills confidence. So I think that's what these numbers are telling you."

Still, the recent drop in mortgage rates could work to prevent such sales figures from going much lower from here, Ian Shepherdson, the chief US economist for High Frequency Economics, said in a report:

The housing market is always quiet at the turn of the year so what matters now is the performance through the spring, when activity usually rises. With mortgage rates dropping sharply we are cautiously [optimistic] that sales will not fall much further and should even rebound a bit by mid-year. But the immediate outlook is bleak.