The Pending Home Sales index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed.

A signed contract is not counted as a sale until the transaction closes. Instead, when a seller accepts a sales contract on a property, it is recorded into a Multiple Listing Service (MLS) as a “pending home sale.” Once that transaction settles it becomes an Existing Home Sale.  The majority of pending home sales become Existing Home Sales transactions, typically one to two months later.

Since pending home sales measure actual existing-home sales, the PHSI provides an accurate and reliable indicator of future home sales activity. Our sample shows that over 80% of all pending home sales go to settlement within a 2-month time-period (and a significant share of the rest close in month 3 and month 4).

Not all pending home sales go to closing. A certain percentage of properties that go under contract are cancelled (or fallout) before ever going to settlement.