Pending sales of previously owned homes fell by a larger-than-expected 6.5% in August as more borrowers seeking home loans were turned away by cautious lenders, a real estate trade group said on Tuesday.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in August, fell to a reading of 85.5, the lowest since records began in January 2001. The
previous low was 89.8 in September 2001.
The fall was sharper than the 2.1% decline in the index economists were expecting for August and comes after existing home sales for the month dipped to their lowest level in five years.
Notably, more than 10% of sales contracts fell through late in the process largely due to borrower trouble securing credit, according to an NAR survey.
"The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30% of signed contracts were falling through in August when the credit crunch problem peaked," NAR Senior Economist Lawrence Yun said in a statement.
Jumbo loans are those valued above $417,000 and are too large to be purchased by government-sponsored enterprises Fannie Mae and Freddie Mac.
The pending sales index was 21.5 percent below the August 2006 level of 108.9.
"The volume of activity we're seeing today is below sustainable market fundamentals because some credit-worthy people are trying to buy homes but can't because of the credit crunch," Yun said.