Pending Home Sales Show Leveling Trend

WASHINGTON, October 31, 2006

Home sales are expected to hold fairly steady in the months ahead, according to the latest reading on pending home sales published by the National Association of Realtors®. 

The Pending Home Sales Index,* based on contracts signed in September, slipped 1.1 percent to a level of 109.1, following a 4.5 percent gain in August, but remains 13.6 percent below September 2005.

David Lereah, NAR's chief economist, said the index shows home sales will not be moving much in one direction or another.  "The present level of home sales is relatively high in historic terms, and we can expect generally minor movements around this level.  We don't expect to see any changes of note until early next year when we're likely to see a modest lift to home sales," he said.  "The market currently is a little lower than expected as buyers try to time their entry.  In the meantime, there's some buildup in demand that will move when consumers realize that conditions are optimal for them."

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 finalized within one or two months of signing.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales.  There is a closer relationship between annual changes in the index and year-ago changes in sales performance than with month-to-month comparisons.

Regionally, the PHSI in the Midwest rose 2.1 percent in September to 96.4 but was 18.4 percent below September 2005.  The index in the West slipped 0.4 percent to 112.5 in September and was 15.2 percent below a year ago.  In the South, the index eased 1.3 percent in September to 125.0 and was 9.0 percent below September 2005.  The index in the Northeast fell 5.9 percent to 89.9 in September and was 15.9 percent lower than a year earlier.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months.  There is a closer parallel between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than there is with month-to-month comparisons.

The forecast will be revised November 10 at NAR's Conference & Expo in New Orleans in a news conference at 11:00 a.m. Central Time.  Existing-home sales for October will be released November 28.  The next Pending Home Sales Index will be on December 4.