Pending home sales in the US rose less than expected last month as contract signings remained near cyclical lows, according to the National Association of Realtors. The forward-looking indicator of home sales, based on contract signings, increased by 0.6% sequentially in August, reaching a 70.6 index level.
Analysts had projected a more substantial 1% increase in the NAR's pending home sales index, as per a Bloomberg survey. On an annual basis, pending transactions saw a decrease of 3%, which was an improvement over the consensus expectation of a steeper 5.5% decline. NAR Chief Economist Lawrence Yun remarked on the situation, stating, "A slight upward turn reflects a modest improvement in housing affordability, primarily due to the decline in mortgage rates to 6.5% in August.
However, contract signings remain near cyclical lows even with home prices continuing to reach new record highs." Further insights from Redfin reveal that home prices rose by 3% in August compared to the same month in 2023, making them just 2.1% shy of an all-time high. The anticipation of further short-term interest rate cuts, following the Federal Reserve's recent 50 basis-point reduction, has contributed to long-term mortgage rates decreasing to around 6% by late September, according to Yun.
Currently, the average 30-year fixed mortgage rate has dipped to 6.08% as of Thursday, marking a two-year low according to data released by Freddie Mac. Yun also noted, "On a typical $300,000 mortgage, that translates to approximately $300 per month in mortgage payment savings compared to a few months ago." Geographically, the Northeast was the only region to exhibit a decline in contract signings last month, dropping by 4.6% sequentially, as indicated by NAR data.
Annually, the West was the sole market to report an increase in this metric. Earlier in the month, the NAR highlighted that US existing home sales fell by 2.5% sequentially in August, amidst a drop in the single-family component. New-home sales also saw a decrease of 4.7% month over month, according to Wednesday's data from the Census Bureau and the Department of Housing and Urban Development..