The National Association of Realtors released the Pending Home Sales Index today.

NAR's Pending Home Sales Index measures the number of home purchase contracts that were signed in the monthly reporting period.  Once "pending" sales contracts are closed, they are considered an existing home sale. Because the Pending Home Sales index tells us how many contracts were signed, it is consider a forward indicator of existing home sales.  A signed contract is not counted as an  existing home sale until the transaction actually closes. 

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process. As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, Congress passed legislation to extend the closing deadline for delayed contracts, this will push some Existing Home Sale closings deeper into the summer/early fall.  READ MORE

Excerpts from the Release...

Pending home sales edged down with near-term sales expected to be notably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index declined 2.6 percent to 75.7 based on contracts signed in June from an upwardly revised level of 77.7 in May, and is 18.6 percent below June 2009 when it was 93.0. The PHSI in the Northeast dropped 12.2 percent to 58.8 in June and is 25.4 percent lower than June 2009. In the Midwest the index fell 9.5 percent to 64.1 and is 27.8 percent lower than a year ago. Pending home sales in the South rose 3.7 percent to an index of 85.8, but are 13.3 percent below June 2009. In the West the index slipped 0.2 percent to 85.1 but is 14.2 percent below a year ago.

In the chart below I called attention to the decline in pending contracts seen during May, one month after the home buyer tax credit expired. At the time that was a new record low. The decline recorded in June pushed that record a bit lower...

Lawrence Yun, NAR chief economist, said lower home sales are expected in the short term, “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve....Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”

Two months after the tax credit expired, the national housing market has gone stagnate near record low levels of activity. Jobs were the issue before the tax credit and jobs are still the issue after the tax credit.

This is what we were saying last October, before the tax credit expired:

"We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially)"

I feel like I'm kicking a dead horse at this point but...any rise in Existing Home Sales will be likely discounted by the market because Pending Home Sales have fallen off a cliff. Not the most pleasant forward looking indicator....