WASHINGTON – The number of people who signed contracts to buy homes fell sharply in April, hitting its lowest point since fall and renewing fears that a recovery in the housing market is far off.
An index of sales agreements for previously occupied homes sank 11.6 percent last month to a reading of 81.9, the National Association of Realtors said Friday. A reading of 100 would be considered healthy.
The last time the index reached at least 100 was in April 2010. That was the final month when people could qualify for a home-buying tax credit of up to $8,000.
Signings are still nearly 8 percent above June's reading of 75.9, the lowest figure since the housing bust.
Contract signings are considered a reliable indicator of the housing market's direction. That's because there's usually a one- to two-month lag between a sales contract and a completed deal.
But the Realtors group has noted a larger-than-usual number of contract cancellations in recent months. Some buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers' initial bids. A sale isn't final until a mortgage is closed.
And as foreclosures and other troubled properties have flooded home markets, it's become harder to get accurate appraisals that buyers, sellers and lenders can agree on.
There "appears to have been a sudden arrest in willingness to commit to a home purchase," said Pierre Ellis, a senior economist at Decision Economics.
"April sale closings came in noticeably less strong than March contract signings — hinting at mortgage problems," Ellis said.
The Realtors group said Friday's report "implies a slower-than-expected market recovery in upcoming months," in light of rising oil prices, severe weather across the Midwest and South and a rise in applications for unemployment benefits.
Some analysts noted that recent natural disasters are causing a slowdown in construction. They point to the flooding Mississippi River, which has devastated homes and farmlands and closed factories; the tornado in Joplin, Mo., which has killed at least 132 people; and a tornado outbreak in April, which caused an estimated $8 billion in damage in Alabama and six other Southern states.
The Realtors index showed that contract signings were uneven across the country: They rose 1.7 percent in the Northeast but dropped 8.9 percent in the West, 10.4 percent in the Midwest and 17.2 percent in the South.
High unemployment, tighter credit and a lingering fear that home prices have yet to hit bottom are preventing many Americans from buying homes. That's true despite super-low mortgage rates and home prices that are falling in some areas to their lowest points in a decade.
Overhanging the entire housing sector are waves of foreclosures. They are forcing down home prices.
Economists say it could be several years before the nation's housing market recovers. Sales of previously occupied homes fell last year to their lowest level in 13 years.
This year is shaping up to be equally bleak. The number of purchases is running at just half the pace of 1963 — even though there are 120 million more people in the United States now.
A reading of 100 indicates the average level of sales activity in 2001, when the index was created. The reading exceeded the 100 threshold from March 2003 to April 2007, before sinking as the country fell into a deep recession.
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