Pending Home Sales Fell In September

Pending home sales, which are new contracts to purchase existing homes, fell -4.6% MoM in September (consensus -3.4%, prior +7.5%). Pending home sales, along with new home sales, are considered to be the most timely indicators for the the housing market. Typically about 80% of pending home sales turn into existing home sales within the next two months, but with the tightening credit markets, more sales may fall out of the pipeline over the next few months. Over the past year, pending home sales rose +7.7% YoY in September versus a year earlier, the second monthly positive annual change.

Regionally, the West was the only region to see an increase in September (+4.1% MoM), after all four regions showed improvement in August. The largest monthly decline in September was the Northeast at -13% MoM, followed by the South at -7.6% MoM and then the Midwest at -0.6% MoM. Over the past year, the West was again the only region to see an improvement in sales, rising +4.8% YoY. The South saw the largest deterioration at -21% YoY, followed by the Midwest at -15% YoY and the Northeast at -10% YoY.

The worsening economy and tightening lending standards, including today's announcement of lower limits for conforming loan limits next year in some high priced regions of the country, will probably keep sales subdued, even where foreclosures are helping reduce prices substantially. It is estimated that foreclosure sales represent up to 35-40% of existing home sales, and are an especially important contributor to sales in the West this year.

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From AP - People looking to buy more expensive homes next year will have fewer options to find financing because Fannie Mae and Freddie Mac will have lower limits on the size of loans they can buy.
The changes, effective Jan. 1, will lower the limit in high-priced real estate markets to $625,500 down from $729,950. Consumers who need to take out home loans above that amount typically pay higher interest rates, and that can price some would-be buyers out of the market.
The Federal Housing Finance Agency, which regulates Fannie and Freddie, kept the limit for lower-cost metro areas at $417,000. Some counties, including parts of Virginia, Utah and Maryland, have limits that range between $625,000 and $417,000.
Lawmakers temporarily raised the loan limits for Fannie and Freddie in a housing bill passed over the summer.
There are fears, however, that the reduced limits will hurt the housing market next year. Fannie and Freddie have become the dominant source of mortgage funding since last year's collapse of the subprime lending market.
The National Association of Realtors is pressing lawmakers to keep the limit at $729,950 to help the U.S. housing market recover from its worst slump in decades.