2010.11.0512:57:00UTC+00U.S. Pending Home Sales Unexpectedly Drop 1.8% In September

Pending home sales in the U.S. unexpectedly decreased in the month of September, according to a report released by the National Association of Realtors on Friday, with the group noting that the drop signals an uneven housing market recovery entering 2011.

NAR said its pending home sales index fell by 1.8 percent in September following an upwardly revised 4.4 percent increase in August. Economists had expected pending home sales to increase by 2.5 percent compared to the 4.3 percent increase originally reported for the previous month.

A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Lawrence Yun, NAR chief economist, said, "Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead."

"Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves," he added. "However, tight credit and appraisals coming in below a negotiated price continue to constrain the market."

The drop in pending home sales in September was partly due to a 5.7 percent drop in pending sales in the Midwest. Pending home sales in the South and the Northeast also fell by 3.5 percent and 1.7 percent, respectively, while pending sales in the West rose by 3.5 percent.

Looking ahead, Yun said existing home sales are expected to rise to 5.1 million in 2011 from 4.8 million in 2010, while housing starts are expected to rise to 716,000 in 2011 from 598,000 this year.

"We've added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum," he added.

Last week, NAR released a separate report showing that existing home sales in the U.S. increased by much more than economists had been expecting in the month of September, although sales remain notably lower compared to a year ago.

The report said existing home sales jumped 10.0 percent to a seasonally adjusted annual rate of 4.53 million in September from a downwardly revised 4.12 million in August. Economists had expected sales to rise to an annual rate of 4.25 million from the 4.13 million originally reported for the previous month.

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