The NAR pending home sales index is down 1.5 percent to 71.4 in October after a negligible downward revision to 72.5 in September. The decrease is somewhat greater than the consensus of down 2.0 percent in the Econoday survey of forecasters. The index is down 8.5 percent compared to a year ago. While rising mortgage rates has put a damper on some homebuying activity, the lack of supply of existing homes means buyers are competing in a lean market.

NAR Chief Economist Lawrence Yun said,"During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years." He continued,"Recent weeks' successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied. Multiple offers, of course, yield only one winner, with the rest left to continue their search."

Although recent relief in the upward trend for mortgage rates could make homebuying more affordable and put more buyers into the market, many of these will have to turn to new construction while supplies in the existing market particularly for entry level units remain hard to find.

Pending home sales in October, which in September rebounded 1.1 percent after falling 7.1 percent in August, are expected to fall back 2.0 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.