What does the future hold?

The pending home sales index from the National Association of Realtors may provide some clues. From the NAR:

"The pending home sales index is a leading indicator for the housing sector, based on the pending sales of existing homes. 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."

In other words the pending home sales index is intended to be an indicator of sales volume over the one to two months that follow each index report.

Here's how the July pending home sales index stacked up against other July's from the recent past:

The July value of 94.8 was the lowest index value out of every July dating back to 2001, back when the index was started. This implies that the sales volume numbers for August and September will be light, especially when you consider how the dynamics of the market have changed over the last year. Consider these realities:

1. Pending contracts that are subject to the sale of another property are less likely to result in a closing compared to similar contracts from a year ago.
2. Pending contracts that are subject to a bank's "short sale" approval often do not make it to closing.

Stay tuned. Let's see how lower interest rates and the first-time homebuyer tax credit as well as other elements of the Housing and Economic Recovery Act affect sales over the coming months.