The figures Tuesday came after a similarly discouraging report on new home sales, illustrating how heavily the housing market depends right now on government help.
In October, buyers raced to get contracts signed in time to take advantage of a tax credit for first-time homeowners that was set to expire. It has since been extended into spring — and now prospective buyers are taking their time.
The National Association of Realtors said its seasonally adjusted index of sales contracts fell 16 percent from October to November, ending nine months of gains. Economists surveyed by Thomson Reuters had expected only a 2 percent drop.
"This was bound to happen at some point, although not by this much," wrote Jennifer Lee, senior economist with BMO Capital Markets. She added: "Gulp."
When the tax credit expires this spring and the government phases out programs to keep mortgage rates low, the housing market will have to stand on its own. Many economists doubt it can.
"We're just going to languish at the bottom," said Anna Piretti, senior economist at BNP Paribas.
The last housing downturn helped drag the nation into the worst recession in decades. The expected dip in home sales and prices this winter appears to pose less of a threat to the broader economy.
Orders to U.S. factories, for example, posted a big gain in November, the Commerce Department said Tuesday. So while the housing market remains vulnerable, makers of steel, computers and chemicals are mounting a surprisingly robust rebound.
"We expect housing to just limp along even as the rest of the economy is growing fairly strongly," said Nomura Securities economist Zach Pandl.
The stock market slid as the reports offered mixed signals about the economy. The Dow Jones industrial average finished down about 12 points.
$8K credit extendedThe tax credit is worth up to $8,000 for first-time homebuyers and was set to expire Nov. 30. Congress extended it through the end of April and broadened it to include a credit of up to $6,500 for buyers who relocate.
Typically, there's a lag of one to two months between when the contract is signed and when the sale closes. To meet the original deadline for the tax credit, buyers would have needed to submit a signed sales contract by the end of October at the latest.
The Realtor group said it expected homebuyers to start responding to the extension by early spring, suggesting that sales will pick up again but fall back later in the year, once the government support is gone.
In addition, the Federal Reserve is buying up $1.25 trillion in mortgage-backed securities to help keep interest rates at or near record lows. That program is scheduled to run out at the end of March, though a sudden jump in rates could force the Fed to extend it.
Associated Press writer Martin Crutsinger contributed to this report.
Real Estate Outlook: Housing RecoveryThanks to tax credit, home sales surge 7.4 percent
