Pending Home Sales Inch Up in August on Slight Improvement in Housing Affordability
By Aarthi Swaminathan|Realtor.com
The numbers: Pending-home sales ticked up in August as a big drop in mortgage rates prompted some home buyers to act.
Contract signings in the U.S. rose 0.6% in August from the previous month, according to the monthly index released Thursday by the National Association of Realtors (NAR).
Pending home sales reflect transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed. Economists view it as an indicator of the direction of existing-home sales in subsequent months.
But home-buying demand remains tepid, despite mortgage rates falling in August and improving housing affordability. The slight increase in contracts signed for homes in August comes off an all-time low in July.
The pending-home sales pace also fell short of expectations on Wall Street. The median forecast was expecting an increase of 1% in August, based on a survey of economists conducted by Dow Jones Newswires and The Wall Street Journal.
Transactions were down 3% from a year ago.
Big picture: Home buyers have largely held back from purchasing new homes due to a variety of factors: the lock-in effect preventing sellers from moving, low levels of inventory, election jitters, and more.
Though home sales have yet to pick up despite the 30-year rate being 110 basis points lower in mid-September than a year ago, “it’s too soon to say,” Amy Lessinger, president of real-estate brokerage RE/MAX, told MarketWatch.
“The market has frozen for a number of years, and it’s been a difficult climate for buyers and sellers,” she added, but with rates falling, “I expect that to change.”
What the NAR said: Even though pending home sales ticked up, “contract signings remain near cyclical lows even as home prices keep marching to new record highs,” Lawrence Yun, chief economist at the NAR, said in a statement.
Looking ahead, he expects home-sales activity to pick up as mortgage rates fall. “The anticipation of more short-term interest rate cuts has pushed long-term mortgage rates down to near 6% in late September,” said Yun.
“On a typical $300,000 mortgage, that translates to approximately $300 per month in mortgage payment savings compared to a few months ago,” he added.