Wary Buyers, Lending Standards
Depress Housing Market

The National Association of Realtors' index for pending sales of existing homes decreased at a seasonally adjusted annual rate of 3.5% to 97.7 from April's 101.2, the industry group said Tuesday.

Its index, based on signed contracts for used homes, was 13.3% lower than the level of 112.7 in May 2006.

NAR economist Lawrence Yun said tighter lending standards and wary buyers continue to depress housing activity. "Some transactions are being postponed from mortgage-market disruptions," Mr. Yun said in a statement. "But better supervised lending will put housing in a fundamentally healthier state over the long term," he added.

Looking forward, Mr. Yun said demand may be building amid the sales lull. "Mortgage purchase applications are trending up, with some of the rise due to buyers reapplying for alternatives to subprime financing," Mr. Yun said. "Nonetheless, home sales should stay close to present levels in the months ahead given an accumulating pent-up demand."

By region, May's reading showed a 3.8% increase in the Northeast from April -- but a 9.6% decrease since May 2006. The index dropped 8.9% in the Midwest in May and was down 11.7% in the 12-month span. The South saw a 7.6% drop in May and a 15.4% decline in the past year. The index for the West rose by 5.6% in May, but was down 13.7% since May 2006.

The NAR's pending home sales index was designed to divine the way the housing market is headed. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.

-- Benton Ives-Halperin contributed to this article.

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