By ALAN ZIBEL, AP Real Estate Writer
WASHINGTON (AP) - The number of buyers who signed contracts to purchase homes dropped in June, as the weak economy and tight lending standards kept consumers away from the housing market.
The National Association of Realtors said Tuesday that its seasonally adjusted index of sales agreements for previously occupied homes dipped 2.6 percent to a reading of 75.7.
That was the lowest on records dating back to 2001 and down nearly 19 percent from the same month a year earlier. The index has fallen by more than 40 percent from its peak in April 2005.
May's reading was revised slightly downward to 77.7. Economists surveyed by Thomson Reuters had expected the index would rise to 78.1.
The index provides an early measure of sales activity because there is usually a one- to two-month lag between a sales contract and a completed deal.
The sales report was driven by a more than 12 percent drop in the Northeast and a 9.5 percent decline in the Midwest. Sales were down only 0.2 percent in the West and rose by nearly 4 percent in the South.
High unemployment, weak job growth and tight credit have hurt the housing market. Sales picked up in the spring when the government was offering tax credits of up to $8,000. However, once the tax credits expired on April 30, sales plunged.
Though mortgage rates have been at or near the lowest level in decades, the economy remains weak. Plus, many buyers have been scared away by the prospect that home prices could start to turn downward again.
Many analysts believe the number of homes for sale or headed for foreclosure is so high that prices will slip this fall and hit the bottom by early next year.
Because housing is such an important engine of the economy, lower prices could dim the recovery. When home values fall and people have less equity in their homes, they tend to cut back on spending.
(Copyright 2010 by The Associated Press. All Rights Reserved.)