We don't usually cover the monthly report on pending home sales issued by the National Association of Realtors® (NAR), concentrating instead on NAR and the Census Bureau's other reports on housing permits and starts and the completed sales of new and of existing homes. However, with good news in such short supply lately - perhaps the understatement of the year - it seems worth talking about the smidgen of sunshine that accompanied the pending sales report for June.

The Pending Home Sales Index, based on residential home contracts signed in June was 102.4, 5 percent higher than the downwardly revised May index of 97.5. The index was still lagging behind the 112.0 pace in June, 2006 by 8.6 percent, but the increase over May was the biggest jump in more than three year, since March 2004 pending sales were 6.1 percent higher than those in February 2004.

The index has a baseline established in 2001, the first year pending sales were examined, based on the average of contract activity that year. That level was designated at 100 in the index. Coincidentally 2001 was also the first of five consecutive years when existing home sales set records.

The official NAR website states that annual changes in the index are more closely related to actual market performance than are month-to-month comparisons but as the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.

The Index increased 8.6 percent to 103.6 in the Western region in June but declined 5.5 percent year-over-year. In the Northeast the index was 96.0, 2.4 percent lower than last year but 3.1 percent higher than in May. The South had an index of 111.6 which was 4.7 percent above May figures but 12.7 percent below one year ago. The Midwest increased 3.5 percent to 92.5 but was 8.2 percent lower than June 2006.

Lawrence Yun, NAR senior economist, said that it was especially encouraging that all four regions saw increases. "However, it is too early to say if home sales have already passed bottom. Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand."

The index is a leading indicator for the housing sector. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Pending sales for June will represent a subset of the actual sales of existing homes that close in July. NAR will release those sales figures near the end of this month.