The National Association of Realtors’ Pending Home Sales Index declined 4.6% from a 7.4% rise in August.  Compared to last year’s figure, it is up 1.6%. This just showed that the homebuyers are still in a wait and see attitude because of the financial market turmoil affecting the economy.

Pending home sales are offers accepted by the seller but the deal has not yet closed. Typically, there is about 1-2 months before a sale is completed.

The drop in sales was moderated by the improvement in affordability such as the sharp 9% decline in year-over-year prices and the more affordable below 6% mortgage interest rates for 30-year-fixed rate mortgage.

According to Lawrence Yun, NAR chief economist, “Right now, we're in a recession, and unemployment will increase through 2009.”

Yun expects that the economy will worsen with the gross national product narrowing through first quarter of 2009. "Consumer spending has halted and businesses are very cautious of expanding. It is unclear by how much the global economic slowdown will dampen U.S. exports, which had been rising strongly," Yun added.

"The depth of the recession depends entirely on housing," he said. "With sufficient housing stimulus, the recession will be shallow. If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation's output and income in a severe recession."

The pending home sales increase were evident in the regions that have seen massive price declines such as the West with 3.7% above from previous month, and  39.5% above a year ago.

Pending sales in the South fell 7.9% for the month and dropped 11.3% compared to last year. In the Northeast, the index plunged 16.8% for the month and 9.4% year-over-year.

With the economy slowing, Yun’s revised 2008 forecast for existing home sales moved downward to 5.02 million for all of 2008. Last month, the sales forecast was 5.04 million existing homes.