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Today, the National Association of Realtors (NAR) released its Pending Home Sales Report for February. It showed that pending home sales declined, with the seasonally adjusted national index dropping 0.4% from January but increasing 8.4% above the level seen in February 2012. Meanwhile, NAR's Chief Economist Lawrence Yun suggests that new home inventory is needed in order to relieve the current "shortage":

Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels. ... Most local home builders are small businesses and simply don't have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.

The following chart shows the seasonally adjusted national pending home sales index, along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005.

Source: Pending Home Sales: February 2013