The NAR's pending home sales index is up 0.6 percent in August to 70.6 after an unrevised 70.2 in July. The August decrease is below the consensus of up 1.2 percent in the Econoday survey of forecasters. Pending home sales are down 4.6 in the Northeast, but up 3.2 percent in the Midwest and West, and essentially unchanged at up 0.1 percent in the South. Despite falling mortgage rates, at least some potential homebuyers may be waiting for further declines in borrowing costs as well as greater power to negotiate on price with rising inventory of existing units.

NAR Chief Economist Lawrence Yun said,"A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August." He continued,"However, contract signings remain near cyclical lows even as home prices keep marching to new record highs."

Contracts taken out in August are with mortgages secured in July and August, not closed sales. Buyers who were pre-qualified for mortgage in July were seeing 30-year fixed rates not far below the 7-percent mark, but on a downward trend that accelerated in early August. The Freddie Mac average for a 30-year fixed rate mortgage August 8 week there was a sharp drop to 6.47 percent and the rate ended the month at 6.35 percent in the August 29 week. Homebuyers who waited until September to secure a mortgage see 30-year fixed rates withing reach of the 6-percent mark.

Pending home sales in August, which in July fell an unexpected 5.5 percent despite lower rates in the month, are seen rising 3.1 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.