Pending home sales fall, tight credit bites

By Lucia Mutikani

WASHINGTON (Reuters) - Pending sales of existing homes fell in September, reversing the previous month's gains, as access to credit tightened, a private report showed on Friday, adding more gloom to the broader economic outlook.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in September, fell 4.6 percent in September to 89.2 from an upwardly revised reading of 93.5 in August. But the September reading was 1.6 percent higher than a year earlier.

Economists polled by Reuters were expecting pending home sales to drop 3 percent.

"The month-to-month weakening in pending home sales is understandable, but because the index remains above year-ago levels it means we're still in a broad period of stabilization," Lawrence Yun, NAR chief economist said.

The report came on the heels of a government data showing that U.S. employers slashed 240,000 jobs in October after eliminating 284,000 in September, driving the jobless rate to 6.5 percent -- the highest since March 1994.

Stocks on Wall Street trimmed some gains on the report, but analysts were somewhat optimistic that the downturn in the housing market, the main trigger of the global credit squeeze, was close to finding a bottom.

The credit crisis has made it difficult for people wanting to buy houses to access loans. Housing market stability is key to any economic recovery amid predictions of a deep and prolonged recession.

"On the housing front we've probably hit pretty much the bottom in terms of sales. That doesn't mean all's well," said Bill Cheney, chief economist at John Hancock Financial Services, Boston.

"Prices will still have to come down quite significantly because even though the pace of sales has pretty much bottomed out, it's not fast enough to work off the overhang of houses that are for sale. There's still probably another million houses that need to get sold before prices really get stable."

Across the country, pending home sales fell 16.8 percent in the Northeast and eased 0.7 percent in the Midwest. They declined 7.9 percent in the South, but rose 3.7 percent in the West.

NAR reckons existing-home sales will total 5.02 million in 2008, rising to 5.32 million next year and 5.62 million in 2010. The trade group forecast new-home sales at 487,000 this year and 413,000 in 2009 before rising to 520,000 in 2010.

Housing starts, including multifamily units, will probably total 936,000 units in 2008 and 781,000 next year, then increase to 886,000 in 2010, the NAR predicted.

It forecast the 30-year fixed-rate mortgage averaging 6.2 percent in the fourth quarter, rising gradually to 6.5 percent in the second half of 2009 and then 6.7 percent in 2010.

(Additional reporting by Lynn Adler in New York;; Editing by Neil Stempleman)