January pending home sales disappoint

January pending home sales fell 4.1% from December, according to the National Association of Realtors. The Bloomberg forecast called for a drop of 1.2%. In other words, the decline was more than three times worse than expected. Regionally, sales declined in the Midwest (-2.4%) and South (-11.7%), rose in the Northeast (+9.3%) and were relatively unchanged in the West (+0.2%). On a year-over-year basis, pending home sales were down 8.9%.

This report confirms that the housing market remained weak in early 2007. We're entering the key spring selling season with elevated home inventories, a lack of speculative demand, and now, a tightening of mortgage lending standards. All of these factors tell me this spring will ultimately prove another lackluster one for home sales. Consequently, further declines in home prices are likely.