The National Association of Realtors Pending Home Sales Index (PHSI) rose 3.6% to 94.6 from an upwardly revised reading of 91.3 in May, 6.7% above June 2008, the fifth consecutive monthly gain for the index, the organization reported Tuesday. The last time there were five months of monthly gains in the index was in July 2003.

The PHSI is a leading indicator of existing home sales based on contracts signed.

The gains were led by the South, which was up 7.1% to 100.7 in June and is 8.9% higher than the same month last year. The West was up 2.9% to 100.4 but is down 0.2% from last June. The Northeast rose 0.4% to 81.2, 5.8% above a year ago. The Midwest advanced 0.8% to 89.9, 11.6% above June 2008.

Lawrence Yun, the Realtor's chief economist, said much of the sales activity was confined to low-priced homes as consumers have taken advantage of first-time homebuyer tax credits. He foreshadowed, however, a potential break in the string of monthly increases by saying, "Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30."

One possible counterbalance to the end of the home buyer tax credit programs could be the recent clarifications to the Home Valuation Code of Conduct(HVCC) from the Federal Housing Administration. Many Realtors, as well as new home builders, have contended that the use of out-of-area appraisers and the inclusion of distressed properties in comparisons have driven many appraisals below true market value, which has made financing more difficult.Charles McMillan, a Dallas-Ft. Worth broker who serves as the NAR president, said, "Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise. This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we¹ll see an even closer relationship between contract activity and closed transactions."

The Realtors, along with other housing industry groups, have been pushing Congress to enact an 18-month moratorium on the HVCC.

The NAR also reported that houses became a bit less affordable in June as prices and mortgage interest rates rose. Its affordability index stood at159.2 in July, down from 171.6 in May and 178.8 in April. The affordability index remains 36.6 percentage points above a year ago. According to NAR, at that level, the typical family would devote 15.7% of gross income to mortgage principal and interest, well below the standard allowance of 25 percent. A median-income family, earning $60,700, could afford a home costing $289,100 in June with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of what a median-income family can afford.

Yun said he expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. "It appears home sales are on a sounder footing and inventory is gradually being absorbed," he said.