The NAR pending home sale index for September is up 1.1 percent to 72.6 after an unrevised 71.8 in August. The index is 11.0 percent below 81.6 in September 2022. The current reading is well above the consensus of down 1.0 percent in the Econoday survey of forecasters.

"Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years," said Lawrence Yun, NAR chief economist."Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated."

The index reflects contracts signed but not yet closed. Some of these sales may never take place for a variety of reasons. However, the month-over-month increase hints that home resales should be somewhat stronger in October as pre-qualified homebuyers snap up available inventory as it comes on to the market. Nonetheless, with 30-year fixed rate mortgage rates approaching 8 percent and home prices remaining high, potential homebuyers may be discouraged from entering the market.

Pending home sales in September, which in August fell 7.1 percent, are expected to decline another 1.0 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.