by Calculated Risk on 1/06/2009 10:01:00 AM

From the NAR: Economic Slump Weakens Pending Home Sales

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.

I'll just repeat my comment from last month:

Existing home sales have been boosted by all the distress sales in low priced areas. Over time, as foreclosure activity shifts to middle and upper income areas, existing home sales will probably decline (the opposite of the NAR view - what a surprise!)

Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so this suggests existing home sales will decline from December 2008 to January 2009.

For some graphs comparing existing home sales to pending home sales, see: Do Existing Home Sales track Pending Home Sales? The answer is yes - they do track pretty well.