The Pending Homes Sales Index rose 0.6% in October, the second straight monthly increase, indicating some stability may be returning to the housing market. That stability is expected to continue over the next couple of months, as mortgage disruptions have eased.

Nevertheless, pending sales are down 18.4% from a year ago. Sales were not evenly distributed, rising strongly in the Northeast and moderately in the West, but falling in the South and Midwest. NAR expects a gradual rise in existing home sales in 2008, up 0.5% to 5.70 million. Median prices are expected to edge 0.3% higher after falling 1.9% in 2007.

Our working assumption has been that the housing market would bottom in the first half of 2008. One indicator arguing that a housing bottom is near is residential spending relative to household net worth fell to 1.07%, consistent with prior housing bottoms.