May pending home sales fall sharply

The National Association of Realtors just released figures on pending home sales in May. This is a leading indicator of existing home sales, because the figures track contract signings rather than contract closings. The details:

* Pending home sales dropped 3.5% in May from April. That's the fourth decline in the last five months and much worse than the 0.5% gain economists polled by Bloomberg had forecast.

* From a year ago, the seasonally adjusted pending sales index dropped 13.3%. The 97.7 reading in May was the lowest since the month of 9/11.

* Sales fell in two out of four regions -- down 8.9% in the Midwest and 7.6% in the South. They rose 3.8% in the Northeast and 5.6% in the West.

Today's pending home sales figures provide no evidence whatsoever of a rebound in housing. Sales fell for the fourth time in the past five months, versus expectations for a small gain. In fact, we haven't seen sales activity this low since September 2001, the month of the 9/11 attacks. Unless and until we work down home inventories, we see mortgage rates fall sharply, or we see prices drop low enough to entice buyers, home sales will remain muted.