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Pending home sales index falls 3.5%

Drop-off in May leaves reading at lowest since 2001

WASHINGTON -- Pending sales of existing homes dropped to their lowest level in almost six years, a real estate trade group said yesterday, demonstrating the persistence of the housing slump.

The 3.5 percent decline in May, follows a drop of 3.4 percent in April, and a 4.5 percent dive in March.

It leaves the National Association of Realtors' index at its lowest point since September 2001.

Lawrence Yun, the association's senior economist, said turmoil in the mortgage market is weighing on home sales, as lenders pull back from riskier mortgages to borrowers with weak credit histories.

"Some transactions are being postponed from mortgage market disruptions," Yun said.

While mortgage applications are increasing, some of that is a result of buyers seeking alternatives to subprime financing, he said.

The association's index of pending home sales fell to 97.7 in May, from a downward revised figure of 101.2 in April. The May figure is 13.3 percent lower than the May 2006 reading of 112.7.

The index stood at 89.8 in September 2001. An index reading of 100 is equal to the average level of contract activity in 2001.

The realtors association index is based on a national sample representing about 20 percent of existing home sales. It is considered an indicator of how sales will perform in the coming weeks because it measures home purchases in which a sales contract has been signed, but the deal has not yet closed.

Pending home sales rose in the West and Northeast, the association said, but fell in the South and Midwest.

The drop in pending sales follows a report from the association last week that showed actual sales of existing homes also fell in May, to the lowest level in four years, while the median home price dropped for a record 10th-consecutive month.

Sales of existing single-family homes and condominiums dropped 0.3 percent to 5.99 million units in May, the slowest sales pace since June of 2003, the trade group reported early last week.

The median price of a home sold last month dropped to $223,700, down 2.1 percent from a year ago.

Sales of new homes have also continued to lag, dragging down the stocks of homebuilders such as KB Home, Toll Brothers Inc., and Pulte Homes Inc.

Shares of all three companies, as well as others in the sector, fell Monday after they were downgraded by a Citigroup analyst.

Last Thursday, KB Home reported a 36-percent drop in revenue and a loss of $148.7 million, or $1.93 per share, for its second quarter ended May 31. The company took a pretax charge of $308.2 million to reflect the decreased value of unsold homes on its books and for walking away from deposits on land it no longer wants to buy.