The pending home sales index has fallen to the lowest level it has seen since the September 11 terrorist attacks due to the recent mortgage market meltdown. This comes as a quite a shock to most economists, who were looking for about a 2% decline and instead saw a whopping 12.2% fall.

However, others say the drop was to be expected given that the mortgage market has been experiencing disruptions that haven’t been seen since 9/11.

Rising delinquencies and defaults in July and August created difficulties in mortgage backed securities sales and many lenders left the mortgage market completely because of it.

Still, Realtors remain hopeful, believing that the problems are temporary and that the majority of buyers don’t face the financing problem because they qualify for conventional financing, rather than subprime loans. They are focusing on the fact that the market has been somewhat stable since mid-August.

Unfortunately, Mike Larson, real estate analyst for independent research firm Weiss Research said the fact that the mortgage market went from bad to worse from July to August suggests that the next pending home sales report could be worse still, and that there is problems ahead for other home sales measures, such as the even more closely watched existing home sales report. “We have these issues with mortgage credit that started to hit in July, but they gathered steam into August,” he said. “This housing downturn is not just a one-month event.”