An index that tracks pending home sales dropped 8.5 percent in February compared to the same month last year and rose 0.7 percent since January, the National Association of Realtors reported today.

The Pending Home Sales Index, which is based on signed contracts for sale transactions that have not yet closed, reached 109.3 in February. An index of 100 is equal to the average level of contract activity in 2001, which was the first year to be examined and the first of five consecutive record years for existing-home sales, the association noted.

Regionally, the index fell 9.7 percent in the Midwest, 8.2 percent in the West and Northeast, and 8 percent in the South in February compared to February 2006.

David Lereah, NAR’s chief economist, said in a statement that “unusually bad weather in February” may be a factor in the index. Also, he said, “We also may be seeing some fallout from a decline in subprime lending. Problems in the subprime mortgage market will become more apparent over time, and they will modestly depress the overall level of improvement in existing-home sales we expect as the year progresses.”

The index is based on a national sample that typically represents about 20 percent of transactions for existing-home sales. In developing the model for the index, the association demonstrated that the level of monthly sales-contract activity from 2001-04 parallels the level of closed existing-home sales in the following two months.

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