(CEP News) - Economists said a recovery in the U.S. housing market won’t arrive for some time after pending home sales for January plummeted 7.7% on Tuesday.

Economists were expecting a smaller 3.5% drop.

Dimitry Fleming, economist with ING said the report from the National Association of Realtors “provides further evidence that, for the moment, lower prices and cheap mortgages are not enough to convince potential buyers to step from the sideline,” adding job security is too damaged to prod Americans into buy homes.

Fleming said with a huge inventory still on the market, stabilization in home prices is still a long way off.

Pending home sales are typically taken as a predictor of existing home sales one to two months ahead, but Ian Shepherdson, economist with High Frequency Economics said the lag has disappeared, perhaps due to seasonal adjustment affects.

“In the meantime, these numbers likely don’t tell us anything about the next existing home sales report beyond what we already know. It will be awful,” he said.

One economist was slightly more upbeat. Charmaine Buskas, economist with TD Securities said U.S. home prices will have to fall further, and will eventually entice home buyers in coming months. Thus, pending home sales will see some support in months ahead, she said.

Indeed, the NAR’s affordability index rose 13.6 percentage points to 166.8 Tuesday, a new record high.

By Megan Ainscow, mainscow@economicnews.ca

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Posted in Categories: Economy, Housing, Releases, USA.

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