The meltdown in the mortgage market in August dried up the supply of homeowners looking to sell, as an industry group reported the lowest recorded level of homes under contract.Most lending institutions have raised the standards by which people can qualify for a loan. Those raised standards have made many people ineligible for the same loan that they could have qualified for during the rise of the housing market. The market which has a glut of homes will continue to see prices decline until this credit issue is resolved.
The National Association of Realtors' pending home sales index fell to a record low of 85.5 from an upwardly revised 91.4 reading in July. That broke the previous low of 89.8 in September 2001, the period in which the terrorist attack shook buyer confidence. The trade group started the index in 2001.
This time the hit to home sales came from buyers having trouble finding the financing they needed to buy homes, coupled with the reluctance of some buyers to jump into the battered market.
"Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments," said a statement from Lawrence Yun, senior economist for the group. "The volume of activity we're seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can't because of the credit crunch."
The pain in the housing industry is far from over and the indutries which rely on the houisng market will continue to face similar recessionary prewsures.