Pending home sales rise 5.2 percent in July

By ALAN ZIBEL, AP Real Estate Writer
Thursday, September 2, 2010 at 7:19 a.m.

WASHINGTON — The number of buyers who signed contracts to purchase previously occupied homes increased in July but remained well below last year's levels, a sign that demand for housing remains weak.

The National Association of Realtors said Thursday its seasonally adjusted index rose 5.2 percent from a month earlier to a reading of 79.4.

A reading of 100 indicates the average level of sales activity in 2001, when the index started. The reading was above that threshold from March 2003 through May 2007. It sank during the recession, only to surge above 100 a year ago when the government first offered tax incentives to spur sales.

When the credits expired in April, the index sank. June's reading of 75.5 was the lowest on record.

Even with the July increase, the latest reading was 19 percent below the same month last year and home sales are at the lowest level in more than a decade.

Potential buyers are holding off purchases because they are worried about jobs and the economy. Many buyers have been scared away by the prospect that home prices could fall again - something most analysts expect. And some are having trouble meeting tighter lending standards and can't qualify for loans.

The cheapest mortgage rates in decades haven't been able to lift the housing market. The average rate for a 30-year fixed loan was 4.32 percent this week, down from 4.36 percent last week, mortgage buyer Freddie Mac said. It was the tenth time in 11 weeks that rates have fallen to the lowest level in decades.

"We should be seeing more sales with financing so cheap," wrote Mike Larson, real estate analyst with Weiss Research. "The fact we're not speaks to the severity of the jobs crisis and the ongoing lack of confidence in the future direction of home prices."

The sales index provides an early measurement of sales activity because there is usually a one- to two-month lag between a sales contract and a completed deal.

"The recovery looks to be a long process, " Lawrence Yun, the Realtors' chief economist, said in a statement. "For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity."

The sales report was driven by a nearly 12 percent jump in the West and a more than 6 percent increase in the Northeast. Sales were up 4 percent in the Midwest and about 1 percent in the South.

The index tracks signed sales contracts for previously occupied homes. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.

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