"The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months," said NAR chief economist Lawrence Yun.
The drop in new contracts comes as mortgage rates continue to fall, just last week to the lowest level of the year so far. Freddie Mac reported 4.60 percent on the 30-year fixed, but analysts say even that's not enough to move this tough housing market.
"Because mortgage rates have been so historically low for so long, the law of diminishing of returns has set in with respect to the low rates being the main influence and catalyst in purchasing a home," says Peter Boockvar of Miller Tabak.
"Pricing, job outlook and access to credit will remain the key factors influencing the decision to buy a home, and I don’t think those reasons will superseded by another move down in mortgage rates in getting a buyer off the fence," Tabak went on to say.
Only the Northeast saw a slight bump up in new sales contracts, barely 2 percent. The South led the drop, down 17 percent, but that was largely du to extremely bad weather. Still the Midwest and West posted drops of 10 and 9 percent respectively.
The Realtors also blame tight mortgage underwriting for the drop in sales and today called on the banks to start moving more money.
"A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves,” writes Yun in the report.
“We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings,” Yun added.
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