The National Association of Realtors reported pending home sales were up more than expected in March. Pending Home Sales Index was up to 101.4 for the month, compared with 97.4 in February (100 = 2001). The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually finalizes within one or two months of signing. This spike has given the NAR a reason to be optimistic. The index is now at the highest level since April 2010 when it reached 111.3.
The base index of 100 is used because 2001 was the first year that this index was examined. It is also during a period of strong years in the housing market. It helps the NAR compare the strength of the housing market to a year that is considered healthy.
There is one concern with using pending home sales. Although it is a leading indicator of the housing sector, there are flaws because the transaction is not complete there is a chance that the deal will not close for a number of reasons.