The NAR pending home sales index for May is down 2.7 percent to 76.5 after a small downward revision to 78.6 in April. The index is down 22.2 percent from 98.3 in May 2022. The decline is below the consensus of down 0.6 percent in the Econoday survey of forecasters. NAR Chief Economist Lawrence Yun puts the blame on a lack of supply. He said,"Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing." He continued,"The lack of housing inventory continues to prevent housing demand from being fully realized."

It appears that serious homebuyers are undeterred by current mortgage interest rates. In May, the average Freddie Mac rate for a 30-year fixed rate mortgage was 6.50 percent, up from 6.34 percent in April, and above 5.23 percent in May 2022.

New home construction is filling some of the demand for homebuyers who are anxious to buy before prices increase and while mortgage rates are relatively more affordable. The situation is likely to continue while current homeowners hold on to the mortgage rates taken out in recent years, many of which were at or near historic lows 2021 and 2022.

Pending home sales in May, which in April were unchanged, are expected to fall 0.6 percent.

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.