An index that gauges pending home sales slipped in January for the fifth month in a row, and was down 4.8 percent since January 2005, the National Association of Realtors reported today.
The Pending Home Sales Index, based on contracts signed in January, slipped 1.1 percent from December 2005 to 116.3 in January, the association reported. In August, the index reached a record of 128.2.
The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed; pending home sales typically are finalized within one or two months of signing, the association reported.
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 the index appears to be flattening. “This looks like we’re touching down for the soft landing we’ve been expecting,” he said. “We are at a much more sustainable level of home sales now – a welcome cooling from the super-heated conditions that were driving exceptional price gains.”
Regionally, the index rose 6 percent in the Midwest in January to 114.3 but was 1 percent below January 2005. In the Northeast, the index increased 0.4 percent to 94.8 but was 12 percent below a year ago. The index in the West declined 1.9 percent to 115.8 in January and was 13.6 percent lower than January 2005. The index in the South dropped 5.1 percent to a level of 128.6 in January but was 2 percent higher than a year ago.
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, the association noted.
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