g home sales show a sustained uptrend, rising for four consecutive months, with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1% to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7% higher than May 2008, when it was 85. The last time there were four consecutive monthly gains was in October 2004. Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. "Closed existing-home sales have improved but are coming in lower than expected, because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said in a statement, alluding to the Home Valuation Code of Conduct that went into effect in May. "Rises in contract activity show buyers are becoming more active, even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy." The index rose the most in the Northeast, gaining 3.1% May (6.8% above a year ago). The index slipped in both the Midwest and the South, declining 1.3% and 1.7%, respectively. Both figures still represent increases over May 2008 numbers. In the West, the index rose 2.2% to 96.9 and is 0.7% above May 2008. The appraisal issue remains complicated, according to NAR President Charles McMillan. "We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don't distinguish between traditional homes and distressed property," he said. "In many cases, appraisers from outside the area are being used, but as everyone knows, real estate is local, and appraisals should be done by an expert with local expertise." NAR's Housing Affordability Index (HAI) fell to 171.6 in May from an upwardly revised 178.8 in April. "Under these conditions, the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record," Yun said. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income. SOUR