Pending home sales pull off an upside surprise

The February pending home sales index was just released. It showed a gain of 0.7%, following a 4.2% decline in January. That topped consensus forecasts for a 0.5% February drop and my expectation for a decline in the range of 2% to 3%. Geographically, sales were down in the Northeast (-1.3%) and West (-6%), but up in the Midwest (+2.9%) and the South (+4.5%)

Still, the pending sales index is down 14% from its April 2005 peak and down 8.5% from February 2006. Also, as I have continually pointed out, the real headwind for the housing market is for-sale inventory -- both existing and new home inventories remain extremely elevated relative to history. That will likely keep the pressure on home prices for 2007.