Declining mortgage rates failed to jumpstart housing market activity last month, with U.S. pending home sales contract signings coming in flat. There is a drag on demand from a softening labor market, as well as the near-term dampening effect of the federal government shutdown. Compared to a year ago, sales declined 0.9 percent.

The NAR pending home sales index was unchanged at 74.8 in September from August (previously 74.7). The August consensus was for a 1.0 percent increase in the Econoday survey of forecasters. August's jump was revised up from +4.0 percent to a 4.2 percent increase. September's flat reading means there is unlikely to be any improvement in existing home sales (when the time comes to close) on a monthly basis, following a 0.2 percent dip in August.

Pending home sales activity was a mixed bag in the four regions. Sales fell 3.4 percent in the Midwest, and 0.2 percent in the West. There were increases of 1.1 percent in the South, and 3.1 percent in the Northeast.

Supply remains limited compared to demand, with 20 percent of respondents to the NAR survey expecting an increase in buyer traffic over the next three months, up from 19 percent in August, and down from 21 percent a year ago. However, 19 percent foresee an increase in seller traffic, unchanged from August and down from 20 percent in September 2024.

Sales have been improving lately with falling mortgage rates. The consensus sees sales up another 1.0 percent in September after a 4.0 percent jump in October.

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.