WASHINGTON (October 27, 2011) — Pending home sales declined 4.6% in September, but were 6.4% above a year ago, according to the NATIONAL ASSOCIATION OF REALTORS®.

NAR chief economist Lawrence Yun said overly tough lending standards are to blame for the drop. “A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly 2 million net new jobs in the past 12 months,” he said.

Regional pending home sales

Pending home sales fell in all four regions of the country. In the Northeast, pending home sales declined 4.7% in September but were 4.0% above a year ago. In the Midwest, the index dropped 6.2% in September but remained 12.3% higher than September 2010. Pending home sales in the South fell 5.5% in September but were 5.0% above a year ago. In the West, the index declined 2.1%, but was 5.6% higher than September 2010.

Loan limits increase mortgage costs

A recent decision by Congress to lower the size of loans that Fannie Mae and Freddie Mac can guarantee in 42 states has led to higher mortgage costs — even for consumers with good credit who can easily afford their mortgage. 

“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 said. “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.”

Source: NAR