The National Association of Realtors' Pending Home Sales Index crept forward in May, up 0.1% to 90.7 from an upwardly revised reading of 90.6 in April, 6.7% higher than May 2008. Though the increase was small, it marked a fourth straight monthly increase in the index, which had not occurred since October 2004, according to the NAR, which released the data Tuesday morning.

Still, the Realtors are warning that the string of increases may not show up in its existing-home sales figures for an extended period of time due to the logjam in mortgage underwriting caused by changes in the code that governs real estate appraisals. "Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,"said Lawrence Yun, the NAR's chief economist. "Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy."

Regionally, the gains were driven by the Northeast and the West. Pending home sales in the Northeast rose 3.1% to 80.9 in May, 6.8% ahead of the same month last year. The Midwest fell 1.3% to 89.2 but is still 11.4% above May 2008. The South dropped 1.7% to 92.6, but remains 7.9% higher than a year ago. The West was up 2.2% to 96.9, 0.7% above May 2008.

The NAR also said its Home Affordability Index dipped in May. The index, which is based on the relationship among home prices, interest rates and family income, fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. Based on that data, a median-income family, earning $60,800, could afford a home costing $296,700 in May with 20% down, assuming 25% of gross income went to mortgage payments. The median existing single-family home price in May was $172,900.

The Realtors said existing-home sales should trend up through the end of the year, with normal local market differences. ³The big question is how much the appraisal issue will impact the ability of contracts to go to closing,² Yun said.

"We see that distressed homes often are selling for 20% less than normal homes in the same area, but some appraisals don't distinguish between traditional homes and distressed property," said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. "In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise."

A bill to slap an 18-month moratorium on the Home Valuation Code of Conduct, which took effect May 1, has been introduced in the U.S. House of Represtatives by Rep. Travis Childers (D-Miss.). H.R. 3044, now in the House Financial Services Committee, is designed to create a period during which the appraisal issue could be studied more carefully. It was enacted under an agreement between the Federal Housing Finance Agency, which oversees Fannie and Freddie, and New York State Attorney General Andrew Cuomo.