Pending home sales are expected to have declined in September compared to the previous release. September and October have been critical times in the 14-month credit crisis, and it's unclear whether the index will capture the impact of the turmoil.

The index, released by the National Association of Realtors (NAR), has been oscillating back and forth for each of the past six months. In August, the index advanced 7.6%, far above expectations, while in the previous month it fell 2.7%, well below expectations.

For September, the Bloomberg consensus is calling for a monthly decrease of 3.4% in September; expectations for the 30 economists surveyed range from -6.0% to +1.0%.

"The trend in the index has been rising for a few months now but the monthly data are hugely volatile," said HFE chief U.S. economist Ian Shepherdson. "After August's 7.4% leap we would have been looking for a drop even without the chaos in the markets in September, but how far the index will fall is anyone's guess."

Highlighting the uncertainty, he added: "Our forecast is -5% but it could easily be double that."

John Ryding and Conrad DeQuadros from RDQ say the data this month won't be as helpful as usual in forecasting actual existing home sales, as many of the pending sales may not have been completed.

"The pending home sales data, which are likely to be weak, are usually helpful for projecting existing home sales. However, to the extent that contracts were signed but the purchaser was later unable to obtain mortgage financing, given the freezing up of credit following the market turmoil, the existing home sales data may be even weaker than the pending home sales results," they wrote.

Following the last release, economists welcomed the positive report, but said a bottom was still nowhere in sight.

Millan Mulraine, economics strategist from TD Securities, said: "ith a weakening economy, worsening labour market situation, higher borrowing costs and tighter lending conditions, potential U.S. home buyers have their backs up against the wall, and we expect this to be reflected in further weakness in housing market activity going forward."

The report will be released at 10 a.m. EST. Though markets will have an eye on the figures, the nonfarm payrolls survey to be released at 8:30 a.m. is far more important.

By Patrick McGee and edited by Megan Ainscow
©CEP News Ltd. 2008