A National Association of Realtors index that tracks pending home sales dropped 5.2 percent from February 2005 to February 2006, and fell 0.8 percent from the January 2006 level.

The Pending Home Sales Index, which is based on home-sale contracts signed in February, was 117.7 in February. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing, the trade group noted.

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.

David Lereah, chief economist for the Realtor group, referred to the dropping index as a “normalization.” He said in a statement, “We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations. This normalization is healthy because it is taking a lot of the pressure off of the decision process for both home buyers and sellers – pressure that was driving abnormal rates of price growth across much of the country over the last few years.”

Regionally, the index in the West fell 7.6 percent to a level of 110.9 in February and was 14.8 percent below a year ago.

The index jumped 6.8 percent in the Northeast in February to 107.9 but was 1.2 percent below February 2005. In the Midwest, the index was 6 percent below a year ago. The index in the South slipped 0.1 percent to 129.3 compared to February 2005.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales, the Realtor group reported. 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.

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