The Good The Bad And The Ugly

More bad news in a seemingly bottomless supply of bad news about the housing market was released today. Pending home sales declined more than forecast in May, a sign prices that have been sliding for more than two years have yet to touch bottom.

The index of pending home resales fell 4.7 percent in May. The experts had predicted a more modest drop of 3 percent. Ironically, sales in the City Lakes office of Edina Realty surpassed May 2007 figures. This came on the heels of a 7.1 percent gain in April, so the news is doubly troubling. Pending resales were down 2.0 percent from May 2007 in the Midwest region of the U.S. This is only slightly better than the South, where pending resales were down 7.1 percent.

The prospect of further price declines may be discouraging offers, while rising mortgage rates and tougher lending standards make it harder to qualify for loans.

``Homes are much more affordable, but they'll probably be even more affordable in six months' to 12 months' time, so it makes people reluctant to jump in,'' Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, said in an interview with Bloomberg Television.

``The message is that last month's big rise was not the signal that the market is starting to turn around. We've had a big correction this month.''

The pending home resales report is considered a leading indicator because it tracks contract signings.

Information provided by National Association of Realtors and Bloomberg News.