An index that is a gauge for future home sales dropped 3.2 percent in October to its lowest reading since March, the National Association of Realtors reported today.

David Lereah, NAR’s chief economist, said a decline was expected. “The drop in pending home sales is an affirmation that we are experiencing a modest slowing in the housing sector,” he said. “The index is pointing to a soft landing for home sales, which will help to correct the inventory shortages that have dominated housing over the last five years. This should restore balance to the market.”

The Pending Home Sales Index, based on contracts signed in October, fell to a level of 123.8 from a reading of 127.9 in September, and is 3.3 percent below October 2004, according to the announcement.

The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, and the sale is usually finalized within one or two months of signing.

A Pending Home Sales Index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed, and was the first of four consecutive record years for existing-home sales. Sales in 2001 were fairly close to the higher volume of home sales expected in the coming decade, well above the levels that were seen in the mid-1990s, so an index of 100 is considered to be historically strong, the association reported.

Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said, “The level of home sales activity remains quite strong from a historical perspective. It’s unrealistic to expect continuous records or to sustain double-digit home-price gains. People shouldn’t interpret a market that is returning to equilibrium as something that’s undesirable – this will be good for the long-term health of the housing sector by taking excessive pressure off of home prices.”

Regionally, the Pending Home Sales Index in the West rose 0.8 percent in October to 134.8, but was 2 percent below October 2004. In the South, the index was down 2.5 percent to 135.4 in October but was 1.2 percent higher than a year ago. The Midwest index dropped 6.3 percent to 112.2, and was 10.2 percent below October 2004. The index in the Northeast fell 6.9 percent to 101.8 in October, and was 6.4 percent lower than a year ago, the association reported.

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 closely parallels the level of closed existing-home sales in the following two months.


Send tips or a Letter to the Editor to or call (510) 658-9252, ext. 137.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription