The NAR's pending home sales index for December is down an unexpected 5.5 percent to 74.2 after a revision lower to 78.5 in November (from 79.0 previously) and versus 77.3 in October. The December outcome is well below the consensus of up 0.4 percent in the Econoday survey of forecasters. The November monthly increase is revised down to show an increase of 1.6 percent versus the 2.2 percent rise previously reported.

On the month for December, the index is down in all four regions, with the Northeast down 8.1 percent, the Midwest down 4.9 percent, the South down 2.7 percent, and the biggest monthly drop at 10.3 percent in the West.

The December index is 5.0 percent below an index level of 78.1 in December 2023, and sales are down in all four regions from a year ago, with the Midwest seeing the largest fall.

NAR Chief Economist Lawrence Yun says it is not surprising that sales would decline in December from November after four straight monthly increases. He downplays the impact of rising mortgage rates and cited the rising share of all-cash purchases. Still, he concedes that rising mortgage rates had hit affordability in the West and Northeast.

"Contract activity fell more sharply in the high-priced regions of the Northeast and West, where elevated mortgage rates have appreciably cut affordability," says Yun."Job gains tend to have greater impact in more affordable regions. It is unclear if heavier-than-usual winter precipitation impacted the timing of purchases."

US 30-year fixed mortgage rates touched a low of 6.09 percent on average in mid-September and were at 6.85 percent at year end, according to Freddie Mac.

NAR says a sale is listed as pending when the contract has been signed but the transaction has not closed. Generally the sale is finalized within one or two months of signing.

Despite rising mortgage rates, sales have gained for four consecutive months and forecasters expect another increase of 0.4 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.