NAR to Launch New Real Estate Sector Indicator in 2005

WASHINGTON – Claiming the use of existing home sales “is a lagging indicator” because it reports on transactions that are closed the prior month, the National Association of Realtors is making plans to release a new measure of the housing market in 2005, one the association says reflects the current level of existing home sales based on real estate contracts. The Pending Home Sales Index will be launched by NAR next year on March 7. NAR intends to release the figure during the first week of each subsequent month and for the index to serve as “an accurate predictor for the existing-home sales figures reported for that month,” since the majority of pending sales become closed sales within one or two months, says NAR. Existing-home sales account for 85% of total residential transactions and are reported near the 25th of each month. NAR says EHS actually reports transactions that are closed the prior month. Since the EHS series is based on a large sample – typically 35% – that series is a stable measure for the U.S. and regional housing markets. NAR’s Chief Economist David Lereah said the new index is based on signed real estate contracts, which are pending on transaction closings before they can be counted as sales. Initially, said Lereah, the PHSI will report a projection for national existing home sales, and as the modeling is enhanced, regional projections should become available. Since the Pending Home Sales Index will be based on a large national sample, about 20%, Lereah said it will be a good predictor for the existing-home sales report that will follow more than a month later.