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Americans signed fewer home-sales contracts in June, as the real estate market deteriorates further
Americans again signed fewer contracts to buy homes in June, as the real estate market continues to deteriorate following the removal of a key stimulus from Uncle Sam.
The pending home sales index -- a gauge of the housing market's health that measures signed sales contracts -- dipped nearly 3 percent in June from a month earlier to its lowest-ever level, the
The disappointing reading comes after pending home sales posted a staggering 30 percent drop from April to May. "If you are looking for a pulse in the U.S. housing market, best of luck," says Mike Larson of
[Check out: Home Sales Poised to Drop In Coming Months.]
The sharp drop in pending home sales is rooted in the expiration of the federal home buyer tax credit. Uncle Sam had been handing out tax credits worth up to
Ian Shepherdson, chief U.S. economist at
Even if the pending home sales index recovers, the declines it has already posted suggest that existing homes sales will drop in the coming months. "Since the vast majority of pending home sales go to settlement in two to three months, the June reading suggests that some further weakness in existing home sales may be in store," Michael Gapen of
[See Downward Pressure on Home Prices Mounts.]
On top of rising inventories, slowing sales could drag home prices lower, Hunter says. "We are noticing and hearing about more price reductions by those that are listing homes for sale," he says. "This latest report is in line with our general feeling that there is still a lot of negative pressure on prices in the resale market." Hunter expects real estate values -- as measured by the
Despite some favorable conditions for buyers -- like cheaper home prices and record-low mortgage rates -- the economic recovery has failed to produce an essential ingredient for a real estate rebound: sustained job growth. "It is kind of remarkable to see this sort of weakness when you have mortgage rates that are at essentially at the lowest levels they have been in the last century," Larson says. "But the jobs just aren't there."
And until the labor market turns around, a convincing recovery in housing will be difficult to achieve, Larson says.