U.S. Pending Home Sales Slow

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The National Association of Realtors' pending home sales index slipped 0.4 percent in February from a month earlier, as the lack of inventory started to impact the market.

The index fell to 104.8 in February, which still represents an 8.4 percent increase from a year earlier. The index is hitting levels not seen since 2010, when a tax credit spurred sales, NAR reports.

But the lack of homes available for sale is dampening sales, NAR reports.

"The volume of home sales appears to be leveling off with the constrained inventory conditions, and the leveling of the index means little change is likely in the pace of sales over the next couple months," said NAR chief economist Lawrence Yun.

The pending home sales index tracks signed contracts, reflecting activity more than actual sales. Not all signed contracts results in completed transactions

The numbers represent the first sign that the number of sales might be slowing, despite evidence of demand in many cities. Earlier this week the S& P/Case Shiller Index showed home prices rising to the highest levels since 2006. And CoreLogic reported a sharp drop in the so-called shadow inventory, homes in foreclosure but not listed for sale.

The pending home sales index has been up over previous year's levels for 22 consecutive months. But NAR earlier warned that total sales for 2013 will still likely fall below 2012 levels, although the lack of inventory will likely push prices higher. NAR predicts 5 million existing homes will be sold this year, down from an earlier forecast of 5.1 million. But prices may rise 7 percent, up from an earlier prediction of 5.5 to 6.0 percent.

"Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels," Mr. Yun. "Most local home builders are small businesses and simply don't have access to capital on Wall Street.  Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."

The index in the Northeast declined 2.5 percent in February, but is 6.8 percent above a year earlier. In the Midwest the index rose 0.4 percent and is 13.2 percent higher than a year ago. Pending home sales in the South slipped 0.3 percent, but are 12.1 percent above February 2012. In the West the index increased 0.1 percent in February, 0.8 percent below a year ago.