Pending Home Sales Plummet

Economists expected home sales to drop once the Obama administration’s homebuyer tax credits ended at the end of April. Most said homes sales would decrease around 15 percent — with March and April stealing purchases from May and June. Few anticipated such a sharp drop. Today, the National Association of Realtors said pending home sales declined 30 percent in May. The index, which measures houses under contract rather than closings, fell 15.9 percent year-on-year.

“Existing-home sales that close in June will remain elevated, but we’ll then see a notable decline for July and August,” Lawrence Yun, NAR’s chief economist, said in a statement. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We’ll also keep a close eye on market conditions on the Gulf Coast.”

He stressed that home prices depend on unemployment starting to decline. And this is one more sour report in advance of tomorrow’s June unemployment report.