Realtors: Number of home contract signings drop in July

WASHINGTON -- The number of people who signed contracts to buy homes fell in July, further evidence that the depressed housing market remains a drag on the economy.

The National Association of Realtors reported Monday that its index of sales agreements fell 1.3 percent in July to a reading of 89.7.

A reading of 100 is considered healthy by economists. The last time the index reached that level was in April 2010, the final month that buyers could qualify for a federal tax credit.

Contract signings are usually a reliable indicator of where the housing market is headed. There's typically a one- to two-month lag between a sales contract and a completed deal.

But officials with the Realtors group say a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than they bid. A sale isn't final until a mortgage is closed.

Michael Gapen, director of U.S. economic research at Barclays Capital Research, said the high number of cancellations suggest "heightened uncertainty on the part of purchasers and tighter credit standards in mortgage finance."

Home loans are harder to come by. Many lenders are requiring 20 percent down payments and strong FICO credit scores to qualify.

Signings are still roughly 18 percent above the June 2010 reading of 75.9, the lowest figure since the housing market went bust more than four years ago.

About half of the 22,442 single-family homes for sale in Las Vegas on the Multiple Listing Service were under contract in July, the Greater Las Vegas Association of Realtors reported. Realtors put 5,448 homes and condos into sales contract in July, compared with 3,427 in the same month a year ago.

Existing home sales in Las Vegas rose 12.1 percent in July to 4,828, and are expected to reach 50,000 for the third straight year, according to Las Vegas-based SalesTraq research firm. Foreclosures and short sales have driven the median price in Las Vegas to $105,000, the lowest in 20 years.

Homes are the most affordable they have been in decades. But bargain prices and super-low mortgage rates have done little to boost sales. Economists say it could be years before the nation's housing market recovers.

The number of people signing home contracts rose in both May and June. But those increases did not make up for a huge drop-off in April, when signings fell more than 11 percent.

Contract signings fell across most of the country. July's index fell 0.8 percent in the Midwest, 2 percent in the Northeast and 4.8 percent in the South. It rose 3.6 percent in the West.

Home prices have risen for two straight months, according to the Standard & Poor's/Case-Shiller home-price index. A flurry of spring buyers has boosted sales. After adjusting for seasonal factors, such as spring buying, prices fell in 11 of 20 metro areas tracked by the index.

Another reason prices are stabilizing is because millions of foreclosures are in limbo. Many have been delayed until the government completes an investigation into improper practices by mortgage lenders. Once that probe is finished, banks will start seizing homes again and prices will likely fall again.

Analysts say the weakening job market and the uncertainty over foreclosures could lead to deeper price declines in the second half of the year. They estimate prices will fall another 5 to 10 percent by year's end.

Las Vegas Review-Journal reporter Hubble Smith contributed to this report.