Pending home sales index off 1.9% in February: NAR

By Ruth Mantell, MarketWatch

Last update: 10:41 a.m. EDT April 8, 2008

WASHINGTON (MarketWatch) -- In a sign that the U.S. housing market may weaken further, an index of sales contracts on previously owned homes fell 1.9% in February from the prior month, the National Association of Realtors reported Tuesday.

The index, considered a leading indicator of existing home sales, was down 21.4% from the February 2007 level.

"The slip in pending home sales implies we're not out of the woods yet, though an era of successive deep sales declines appears to be over," said Lawrence Yun, NAR's chief economist, in a statement.

January's level was revised slightly higher.

By region, February's pending home sales index fell 9.8% in the West, while the South registered a 5.5% drop and the Midwest experienced a 3.7% decline. In the Northeast, the index rose 3.2%.

Mike Larson, a real-estate analyst at Weiss Research, wrote that there appears to be some signs of bottom fishing in the market emerging.

"But we'll have to see if these pending transactions can actually close," Larson wrote. "My concern is that stingier lending standards are leading to more deals falling apart."

The dip in the national index isn't large enough to signal "a further downward lurch," wrote said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"At this level, pending sales are consistent with broadly stable existing home sales," Shepherdson wrote. "We still think the next move in the index will be a further decline, as it becomes clear that the accelerating drop in prices means bargain-hunting is seriously premature."

NAR expects the aggregate existing-home price to "ease" by 1.4% this year, to a median of $215,800.

"Exceptionally weak home sales related to jumbo loans' problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half," Yun said.

The trade group also sees existing-home sales rising to an annual pace of 5.9 million in the fourth quarter from 4.9 million in the first quarter. Existing-home sales this year are forecast at 5.39 million.