The National Association of Realtors Pending Home Sales Index plunged in May, dropping 30% to 77.6 from April's 110.9, the lowest level on record since the PHSI was instituted in 2001. The PHSI was 15.9% below May 2009 when it was 92.3.

The drop, while expected, was far deeper than the 14.5% sequential drop to98.4 forecast by analysts in the wake of the expiration of the federal home buyer tax credit.

The index, which is based on signed purchase contracts, indicates existing home sales will remain depressed through summer. The existing-home figures could be skewed by sales that missed the June 30 closing deadline under the tax credit. Congress on Wednesday passed an extension of the deadline until the end of September; the president is expected to sign the bill. The Realtors estimate there could be as many as 180,000 such delayed sales.

Lawrence Yun, the NAR's chief economist, sounded a note of caution in his statement on the PHSI but made no mention of the fact that the drop was a record. "Consumers are rational and they rushed to meet the tax credit eligibility deadline in April," he said. "The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June."

Yun added, "Existing-home sales that close in June will remain elevated, but we¹ll then see a notable decline for July and August."

The drop was across the board regionally, though the West was least worse with a decline in the PHSI of 20.9% to 85.3, 15.1% below a year ago. The PHSI in the Northeast fell 31.6% to 67, 14.8% lower than May 2009.The Midwest dropped 32.1% to 70.8, 20.2% below a year ago. The South fell 33.3% to 82.5, 14.4% lower than May 2009.

Yun said the Realtors expectations for the housing market depended in large part on job creation. "If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity given very favorable affordability conditions," he said.

However, prices will remain under pressure. "In most areas of the country there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,"Yun said. NAR forecasts the national median home price to rise only 4% cumulatively over the next two years.

"One factor that could lead to price acceleration in upcoming years for some markets is if the very low levels of new home construction were to persist for another year or two," he concluded.