Pending home sales dip as the housing market slowly recovers

Pending home sales dropped slightly in February but are still well above last year's levels. 

The sales index, a forward-looking indicator based on contract signings, fell 0.5 percent to 96.5 percent in February from 97 percent in January, which was the best performance since April 2010, the final month of a federal homebuyers tax credit, the National Association of Realtors (NAR) said Monday. 

A healthy market index is 100 percent.

Despite the slight decrease, the index is 9.2 percent above February 2011, when it stood at 88.4. 

"The spring homebuying season looks bright because of an elevated level of contract offers so far this year,” said Lawrence Yun, NAR chief economist. 

"We’re seeing the continuation of an uneven but higher sales pattern," he said. 

“If activity is sustained near present levels, existing-home sales will see their best performance in five years."

NAR is predicting that sales will rise this year between 7 and 10 percent. 

The data reflects contracts but not closings — it usually takes a month or two to close on a pending purchase. 

After years of record-low sales and an abundance of foreclosures, the housing market is starting to make progress toward more sustained improvement. 

Existing homes sales this winter were the best in five years, builders are more confident that growth will be slow but steady this year and banks are starting to lend again. 

Regionally, contract signings in the Northeast slipped 0.6 percent to 77.7 percent in February but are 18.4 percent above a year ago. 

In the Midwest the index jumped 6.5 percent to 93.8 percent — 19 percent higher than the same time last year. 

Meanwhile, signings in the South fell 3 percent to 105.8 percent in February, 7.8 percent above a year ago. In the West, the index declined 2.6 percent in February to 99.3 percent, 1.8 percent below last year.