More Signs of Trouble in the Housing Industry

A leading indicator of the health of the home buying industry - the Pending Home Sales Index - has reached a new low according to the National Association of Realtors:

An index that forecasts near-term home sales fell in August to a record low as would-be homebuyers had difficulty getting mortgages.

The National Association of Realtors said Tuesday its seasonally adjusted index of pending sales for existing homes fell 6.5 percent from July and 21.5 percent from a year ago. August's reading of 85.5 was below analysts' expectations and the lowest ever for the index, which started in January 2001.

Analysts surveyed by Briefing.com had predicted the index would fall by 2 percent from July. The pending home sales index is designed to predict sales levels over the following two months.

An index reading of 100 is equal to the average level of sales activity in 2001.

Analysts believe that it will take months for the situation to improve.

In some areas, 30% of signed contracts fell through in August. That means that even credit worthy prospects are having trouble securing financing.

Much of the problem can be traced to the still unravelling crisis in the sub-prime mortgage industry where one of the biggest companies, Countrywide, continues to suffer a record number of foreclosures. Additional scrutiny has fallen on the company when it was revealed that several senior executives had been selling off their stock over the last year, skirting the edge of SEC rules in doing so.