by Calculated Risk on 11/07/2008 11:30:00 AM

From the NAR: Pending Home Sales Down on Tight Credit and Economic Slowdown

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in September, declined 4.6 percent to 89.2 from an upwardly revised reading of 93.5 in August, but is 1.6 percent higher than September 2007 when it stood at 87.8.

Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so this suggests existing home sales will decline in November (from October).

This data shows some of the impact of the credit crunch. October Pending Home sales will probably be much worse. Also it is very possible that many of these pending sales will drop out of escrow due to tighter lending standards.

Also many of these sales are for distressed sales. Last month NAR economist Yun suggested that "distressed sales are currently 35 to 40 percent of transactions". Distressed sales include foreclosure resales and short sales.

For some graphs comparing existing home sales to pending home sales, see: Do Existing Home Sales track Pending Home Sales? The answer is yes - they do track pretty well.