The National Association of Realtors will begin publishing a new index in March that promises to provide a better handle on the market for existing homes.

The Pending Home Sales Index will be based on signed rather than closed contracts, thereby delivering "a more current read ... than any other indicator currently available," NAR Chief Economist David Lereah said at the group's annual convention in Orlando.

"This is major. This will turn the industry on its head," Lereah told reporters.

NAR now publishes a report on the 25th of each month that focuses on seasonally-adjusted existing home sales, median prices and inventory levels.

Existing houses account for some 85 percent of all residential sales activity. But the NAR series is a lagging indicator because it covers transactions closed in the previous month.

As a leading indicator, the new PHSI will project national sales that will settle in the next month or two.

"This is the most valuable contribution we can make to housing and the economy," Lereah said at a press conference. "The index is going to be very reliable and extremely accurate, and I suspect it will be a very closely watched indicator of a leading sector of the economy."

There are only a few other statistics that are considered to be leading indicators of housing activity.

New home sales are viewed as such because they are based on contracts signed the month before. But the sample is small -- only 2 percent -- so the data is volatile and it takes months to establish a trend.

Also, the relationship between new home sales and used home sales is not consistent over time.

Mortgage applications also are seen as a gauge of future activity, and building permits indicate a level of optimism by home builders. But Lereah said the statistical relationship between these indicators and existing home sales is "less than satisfying."

The NAR economist said the vast majority of pending sales translate into closed deals, typically within four to eight weeks, so there will be a "strong correlation" between the two reports. But both, he added, "will tell you something different."

The idea for creating the index was hatched more than two years ago in a meeting with the Federal Reserve Board Chairman Alan Greenspan, Lereah said.

Modeling for the new index, which will be released in the first week of every month, examined the monthly relationship between signed contracts and transaction closing over the last three years. Unlike mortgage applications, only a small percentage of signed contracts do not close, Lereach said.

Initially, the PHSI will report a projection based on 20 percent of all national existing home sales. But as modeling is enhanced over time, regional projections should become available.