Forecasts for future home sales fell to a record low as potential homebuyers have decided to hold out and handfuls of them are finding it difficult to get a mortgage.
The National Association of Realtors (NAR) announced that pending sales of existing homes fell 6.5 percent from July and a huge drop of 21.5 percent from a year ago.
Originally, analysts had predicted sales would fall 2 percent from July.
Due to rising defaults and foreclosures, lenders are only going with the safest of mortgage loans to many borrowers with weaker credit histories or self-employment backgrounds further constricting home buyer options. Lenders are also having it difficult mainly in the West and Northeast regions where home prices are high because government sponsored companies Fannie Mae and Freddie Mac cannot buy jumbo home loans above $417,000.
The challenging environment is slowing down home buyers from purchasing homes and is expected to continue slowing due to the “credit crunch”. It may take months or couple of years for the situation to improve.