The housing market will continue to stabilize in the months ahead, according to NAR’s most recent Pending Homes Sales Index (PHSI). In August, the PHSI stood at 110.1, up 4.3 percent from the previous month and down 14.1 percent from August 2005. The index gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed. A PHSI of 100 or more generally indicates a high level of homes sales activity.

"Our sense is that home sales may have reached a low in August — the Pending Home Sales Index shows home sales should be fairly stable over the next two months, although a minor decline is possible," said NAR Chief Economist David Lereah. "With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms."

The PHSI declined across the nation in August compared with the readings a year ago. On a regional basis, the PHSI was highest in the South, where it declined 9.4 percent to 126.8. In the West, the index fell 16.9 percent to 112.7. The PHSI also declined in the Northeast and Midwest regions, falling to 95.4 and 93.8, respectively