Signed contracts moved upward in May, according to the National Association of Realtors' (NAR) Pending Home Sales Index, which rose 8.2% for the month to a reading of 88.8. May's reading is 13.4% higher than where it stood in May 2010, when the industry was reeling from the recent expiration of the home buyer tax credit.

While the improvement is more than welcome by the real estate industry, its satisfaction is muted by the fact that it comes on the heels of April’s 11.6% drop from March, which brought pending home sales to the lowest level seen in seven months.

Patrick Newport, U.S. economist at IHS Global Insight, cautions against pinning too much hope on May’s gain, pointing to the index’s small sample size and the fact that the Mortgage Bankers Association’s numbers for purchase applications haven’t reflected the up tick. "Those numbers have been pretty flat for the last two or three months," he said on a call with Builder. "The market for selling homes is still extremely weak."

The Pending Home Sales Index, Newport said, "is only good for one thing, and that’s forecasting existing-home sales coming up in the next month or two." But even NAR’s estimates of existing-home sales "have serious problems," he said. In February, CoreLogic called NAR’s existing-home sales numbers into question, saying that the association was overstating numbers by as much as 20%. NAR has been looking into the matter and has said that numbers may be revised downward this summer.

The Pending Home Sales Index rose 7.3% in the Northeast in May for a monthly reading of 69.2. It gained 10.5% in the Midwest for a reading of 82.8. The South saw an improvement of 4.1% to 95.0. And in the West the index rose 12.9% to 100.6.

Claire Easley is a senior editor at Builder.

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