by Calculated Risk on 12/02/2010 10:00:00 AM

From the NAR:
Strong Rebound in Pending Home Sales

The Pending Home Sales Index,* a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009 ... The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

This suggests existing home sales in November and December will be somewhat higher than in October.

This also suggests months-of-supply will fall below double digits in November and December, but will remain elevated putting downward pressure on house prices.

Note: in the calculation of months-of-supply, the NAR uses the seasonally adjusted sales rate, but they do not seasonally adjust inventory. Since inventory declines every November and December, the months-of-supply would decline even if the sales rate stayed steady. Since it appears sales will increase slightly (based on pending home sales), and inventory will seasonally decline, the months-of-supply will fall. For more, see: Housing Supply: What do all the numbers mean?