A National Association of Realtors index that gauges pending home sales dropped 10.5 percent in March compared to the same month last year, and was down 4.9 percent from February 2007.

The Pending Home Sales Index, which is based on signed contracts for home sales that have not yet closed, was 104.3 in March, NAR reported.

The index is considered a leading indicator for the housing sector, as pending sales typically are finalized within one or two months of signed contracts.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined for the index and the first of five consecutive record years for existing-home sales.

The index reached its lowest level in March since a reading of 103.5 in March 2003.

David Lereah, NAR’s chief economist who will leave this post next month to join Move Inc., said in a statement, “We’re starting to see the effects of a decline in subprime lending and tighter lending standards.”

Regionally, the PHSI in the West reached 104 in March, which was 8.6 percent below a year ago; the index in the Northeast was 94.2, down 14 percent compared to March 2006. The index in the Midwest fell 9.5 percent from March 2006, to 95.9; and the index in the South dropped 10.6 percent compared to March 2006, to 115.2.

The Pending Home Sales Index is based on a large national sample that typically represents about 20 percent of transactions for existing-home sales. The level of monthly sales-contract activity from 2001 through 2004 has been demonstrated to parallel the level of closed existing-home sales in the following two months, the Realtors group reported.

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