Key home sale index slides to 6-year low

Reading of pending home sales sinks to lowest since September 2001, suggesting more pain for the housing market.

NEW YORK (CNNMoney.com) -- Existing home sales are likely to see more declines in coming months as a key reading of pending deals fell to nearly a six-year low in May, a real estate
group said Tuesday.

The National Association of Realtors said its index of pending home sales, which reflects homes under contract, sank to 97.7 in May from 101.2 in April. The latest reading is 13.3 percent lower than May 2006.

The index was set at 100 at the start in 2001. The May reading is the weakest since September 2001, the lowest on record, when the Sept. 11 attacks hit consumer confidence. The latest reading matches the third lowest.

Lawrence Yun, the Realtors' senior economist, said home sales continue to be hit by tighter lending criteria due to problems with subprime mortgages, loans to buyers with weak credit, coupled with and a lack of buyer confidence in the market.

The existing home sales report had already shown problems before the latest pending home sales numbers. Last month
the group's May figures showed the slowest pace of home sales since June 2003, while the glut of homes on the market hit a 15-year high.

The pending home sales report does not including any reading on prices. But both new and existing home prices have been falling year over year as the glut of homes forces sellers to ask less. The downturn in home sales and problems in subprime mortgages have also hit new home sales.

The lowest number since September 2001...

Considering the effects the terrorist attacks had on the economy at that time that is pretty dismal news. The sad part is it’s going to get worse. May and June are the hottest selling months for real estate. If the numbers were that bad, it’s not going to get better.

When you consider the beginnings of an equity meltdown starring CDOs and the like, due in no small part to sub-prime mortgage defaults, the road ahead looks more like a cliff.
Vern