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US pending home sales index points to easing market   Article Date :9 Oct 2006 Index published by the National Association of Realtors®. US home sales should be levelling out in the months ahead at a lower pace, according to an index based on pending home sales, a leading indicator for the housing market published by the National Association of Realtors®. The Pending Home Sales Index,* based on contracts signed in July, is down 7 percent to a level of 105,6 from a downwardly revised reading of 113,5 in June, and is 16 percent lower than July 2005. The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalised within a month or two of signing. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales. David Lereah, NAR’s chief economist, said there’s a closer relationship between annual changes in the index and actual market performance than there is with month-to-month comparisons. “In looking at year-to-year comparisons, the pending home sales index has been very close in predicting the actual pace of home sales,” he said. “Based on recent changes from a year ago, the index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead.”Lereah said psychological factors account for much of the decline in July home sales. “We’ve never seen a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy in growing and interest rates are favourable,” he said. “Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilise or for more favourable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail.” CLICK HERE TO RETURN TO THE MAIN NEWS PAGE