The most forward looking indicator of home sales is out. "Pending home sales, the leading indicator for the housing sector, are continuing to ease, according to the National Association of Realtors. The index, based on contracts signed in April, fell 3.7 percent to a level of 111.8 from an index of 116.1 in March, and is 11.7 percent below April 2005. This marks the third consecutive monthly decline."

"The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing."

"David Lereah, NAR’s chief economist, said various housing and economic indicators have been moving in different directions. 'When some measures are up and others are down, it tells us that we’re in a period of transition. Pending homes sales probably give us the best measure for the overall direction of the housing market, which is falling from historical highs,' he said. 'I see this time of adjustment as being a trough in home sales that will more or less level out toward the end of the year.'"

"Overall construction activity suffered the first setback in 10 months in April as residential homebuilding dropped by the largest amount in more than two years, the government reported Thursday."

"The Commerce Department said that total construction spending dipped by 0.1 percent in April, the first setback since June 2005, with much of the weakness coming from a 1.1 percent fall in residential construction, the biggest drop in this sector since January 2004."

"Average U.S. home prices rose 12.54 percent over the 12 months to March 31, but gains in the most recent quarter indicate easing in the market, the U.S. Office of Federal Housing Enterprise Oversight said on Thursday."

"Home prices rose 2.03 percent from the fourth quarter of 2005 to the first quarter of 2006, or at an annualized rate of 8.12 percent. That quarterly rate is the lowest since the first quarter of 2004, the government agency said."

"While house prices continued to climb in many areas, some states saw price declines in the first quarter for the first time since the fourth quarter of 2002, the report said."

From the OFHEO sites PDF file. "An important factor that has affected the HPI in some recent quarters is the influence of refinancings on the overall index. Valuations derived from refinance appraisals are constructed under different circumstances than those surrounding purchase prices; appraisers operate under specific types of pressures and may employ different 'comparable' properties in estimating value than were (implicitly) used in the formation of a purchase price."

"Similarly, appraisals conducted for 'rate-term' refinances can in fact look different from appraisals for 'cash-out' refinances. In areas where the cash-out refinancing has grown the most, the divergence between the HPI appreciation rate and the purchase-only rate is the greatest."

"In conclusion, the empirical evidence suggests that the growing prevalence of cash-out refinances over the last year has had the effect of increasing measured appreciation rates for the HPI. Homes with cash-out refinances likely are disproportionately those that have experienced the most appreciation. Thus the HPI dataset, which includes appraisals used for cash-out refinances, may have relatively more rapidly appreciating houses than the purchase-only index."