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Pending home sales slumped in August as mortgage interest rates reached new highs, new data shows.
The Pending Home Sales Index dipped 7.1 percent to a measure of 71.8 between July and August, according to the National Association of Realtors, while pending transactions fell 18.7 percent year over year.
The steep drop in pending contracts came as mortgage rates topped 7 percent in August, further wiping out the already shrinking pool of capable homebuyers.
“Mortgage rates have been rising above 7 percent since August, which has diminished the pool of home buyers,” NAR Chief Economist Lawrence Yun said in a statement. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.”
Pending home sales dropped in all four major U.S. regions, declining 0.9 percent monthly in the Northeast and 18.2 percent annually, while falling 9.1 percent month over month in the South and dropping 17.6 percent from August 2022. The Midwest index fell 7 percent in August, a 19.1 percent dropoff from the previous year, while the West saw pending sales retreat 7.7 percent in August and fall 21.4 percent from last year.
“It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” Yun said.
The drop in pending sales lined up with New Home Sales — which are also based on contract signings — dropping 8.7 percent in August.
Other housing experts admitted to seeing no end in the immediate future to the dropoff in housing market activity, with the Federal Reserve unlikely to reduce interest rates anytime soon.
“Today’s data signal that home sales activity is unlikely to see a strong pick up in the next few months as limited options and significant affordability headwinds weigh on buyers,” Realtor.com Economic Research Analyst Hannah Jones said in a statement. “Today’s housing market is characterized by the tension between buyers and sellers, as both parties consider their response to climbing mortgage rates and still-high home prices.”
