The NAR pending home sales index is up 2.5 percent to 76.9 in December, while November's index is revised up to 75.0. The reading is above the Econoday consensus of down 1.0 percent in December. The NAR noted that this is the first month-over-month increase since May. The report indicates that recent dips in mortgage interest rates have had an effect in getting some buyers back in the housing market. Although supply remains limited, price increases have decelerated significantly. With improved home affordability and buying being a viable option to renting, the decline in home sales may have bottomed out late in 2022.

Pending home sales, which have been falling steeply month after month, are expected to fall 1.0 percent in December.

The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the pending home sales index which measures home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

The National Association of Realtors moved up its publication schedule in 2011. Prior to 2011, the reference month was two months trailing the release date. In 2011, the reference month trails only by one month to the release month.