Pending home sales are an unreliable indicator

The Wall Street Journal says not to trust pending home sales as an indicator of actual future sales.

The National Association of Realtors is trumpeting a fourth consecutive monthly gain in their report of pending home sales. The index tracks the number of contracts signed on homes...

In the past those contracts would give a pretty good indication of what existing home sales would look like when the NAR reports its [sales] numbers a few weeks later. These days the report’s reliability as an indicator is shakier. More pending sales appear to be falling through, as financing becomes harder to reach or as buyers and sellers renege on pricing. ...

Indeed, for nearly a year, the pending home-sales index appears to be over-predicting closed sales relative to historical levels, notes independent housing economist Thomas Lawler.