Pending home sales declined again in August, as the leading indicator continued its bounce along the bottom. Contract signings were down 1.2% from July, bringing the National Association of Realtors’ Pending Home Sales Index (PHSI) to a reading of 88.7. While pending sales remained 7.7% above where they stood in August 2010, the gap seen in the annual numbers comparisons has been shrinking over the past few months: In June, this year’s numbers stood 19.8% above the previous year; in July, pending sales were 14.4% above July 2010.

The index, however, “has not been a good predictor over the last couple months,” says Patrick Newport, U.S. economist at IHS Global Insight. “It predicted that things would get better in July, and they got worse. Then it said things would get worse in August, but they got better.” Overall, he says, the index has been dangling near a reading of 88 or 89 since January, while existing-home sales have been falling. Fewer homes being bought by investors and higher rates of cancellations may be to blame for the PHSI’s missteps, Newport says.

Newport points to another leading indicator, the Mortgage Bankers Association's Purchases Index, which unfortunately echoes the grim outlook. That index dropped in August, and while it is currently near a 16-year low, Newport predicts that it will likely drop again in September.

Should this month’s pending sales report prove accurate, home sales will be down in most regions in the coming months, except the South. The Northeast was down the most, declining 5.8%; the Midwest was down 3.7%; and the West was down 2.4%. The South gained 2.6%.

Claire Easley is a senior editor for Builder.

Learn more about markets featured in this article: Greenville, SC.