PENDING U.S. HOME SALES INDEX DROPPED

SECOND MONTH IN A ROW

A forecasting tool used by the housing industry to predict demand pointed down in March, suggesting sales of previously owned homes would fall.

The National Association of Realtors on Tuesday said its index for pending sales of existing homes declined at a seasonally adjusted annual rate of 1.2% to 116.2 from February's 117.6. The index was 6.0% below the level of 123.6 in March 2005.

Rising mortgage rates are affecting the market, according to NAR's chief economist David Lereah.

"Home sales rebounded from the slide that started last fall, but the pending sales data is showing a dampening effect from rising mortgage interest rates that have been trending up since January," Lereah said. "This means a modest slowing can be expected in the sales pace in the months ahead, although the market will hold at historically strong levels."

By region, the index showed a 5.2% climb in the Northeast in March from February - but a 1.1% drop since March 2005.

In the West, the index increased 0.7% in March but was 13.3% below a year prior. The South eased 1.2% in March and was 1.6% below March 2005. The Midwest fell 7.4% in March and was 9.3% below a year earlier.

The NAR's pending home sales index was designed to try measuring the direction of the housing market in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction has not closed. Pending sales typically close within one or two months of signing.
Last week, the NAR reported sales of existing homes in the U.S. rose to a 6.92 million annual rate during March, a 0.3% advance from February's 6.90 million even though mortgage rates stepped up. Year-over-year, sales were down 0.7%. The average 30-year rate was 6.32% in March, compared with 6.25% in February and 5.93% in March 2005. The inventory of homes on the market increased to 5.5 months in March from 5.2 months in February. The median home price held steady at $218,000.

(Courtesy of Jeff Bater - Wall Street Journal)