Pending home sales dip in March

It's pending home sales day again. This time, the National Association of Realtors is providing data on pending sales activity for March. What did the numbers show?

* Pendings dropped 1% in March, right in line with the forecast for a 1% decline. February's reading was revised lower, however -- to -2.8% from the previously reported 1.9% decline.

* Regionally, pending sales fell in 3 out of 4 regions -- the Midwest (-10.4%), the South (-0.1%), and the West (-1.4%). Sales rose 12.5% in the Northeast.

* The index level was 83 in March, down 20.1% from the year-earlier reading of 103.9. That's the worst on record for this index, which dates back to January 2001.

The string of unimpressive housing numbers continues, with pending home sales showing another decline in the month of March. Sales are down more than 20% from a year ago, and almost 35% from their April 2005 peak. There's a real risk that many of these pending sales won't turn into closed transactions, too, given the tightening we've seen in the mortgage lending market. The latest Federal Reserve figures show that a greater percentage of lenders than ever before are tightening standards on prime mortgages. And you don't need me to tell you the subprime market is all but gone.

If there's a bright spot out there, it's that the supply of homes for sale does appear to be declining in some markets. I attribute that to a combination of falling construction activity, fire sales of spec homes by home builders, and aggressive pricing by other motivated sellers, including banks holding foreclosed properties. The quicker prices decline, the sooner affordability will be restored, and the faster the overhang of inventory will be worked down.