The deep housing downturn and a related tightening in credit conditions have raised the prospect the U.S. economy could tumble into recession.
Morgan Stanley economists said in a research note Monday that a "mild" U.S. recession was now likely, with tighter credit set to put a crimp on business spending.
Separately, a closely watched survey of economists released Monday showed forecasters more generally had seen recession risks rise over the past month.
The odds of a recession in the next 12 months are nearly four-in-10 now, versus one-in-three a month ago, the Blue Chip Economic Indicators newsletter said.
Year-over-year, pending sales were down 18.4 percent, the third largest drop since the trade group began keeping such records in January 2001. Only the declines registered in August
and September were deeper.
Lawrence Yun, the trade group's chief economist, said home sales and prices should level out next year after this year's declines.
Existing home sales should hit a pace of 5.70 million in 2008 compared to an expected 5.67 million this year, NAR said. It said median home prices would likely fall 1.9 percent this year, but rise 0.3 percent in 2008 to $218,300.
This year's home price decline would be the first annual decline since the Great Depression, Yun said.
"Certainly, the market has turned .. far worse than I anticipated," he said, noting that NAR had downwardly revised its homes sales forecast several times this year.
The pending homes sales data painted a mixed picture regionally, with the Northeast seeing a 16 percent rise and the West an 8.4 percent increase. In contrast, pending sales fell 1.4 percent in the Midwest and 7.8 percent in the South.
Americana Mortgage Group President Robert Moulton, whose Long Island, New York-based mortgage brokerage serves Florida, said that state is likely responsible for a large share of the
decline seen in the South.
"All of Florida is hurting after a lot of speculative buying and now there are people with two, three houses on their hands," he said.