Pending home sales rose 0.6% in August, barely above the near-record lows seen in July, according to the National Association of Realtors (NAR).
The NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, moved up slightly in August to 70.6, from July’s dismal reading of 70. An index of 100 is equal to the level of contract activity in 2001.
With Freddie Mac reporting that the interest rate on the 30-year fixed-rate mortgage fell to 6.35% by August 30, the housing industry was hoping for more of a surge in potential home buyers coming to the market. But that didn’t happen. In fact, the number of pending transactions were down 3% from August 2023.
“A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August,” said NAR Chief Economist Lawrence Yun. “However, contract signings remain near cyclical lows even as home prices keep marching to new record highs.”
Pending home sales were up in three of four NAR U.S. regions, with both the Midwest and West indices rising 3.2%. The Midwest index jumped to 70, down 3.6% from a year earlier. The West index reached 58, which was up 2.7% from August 2023.
The South experienced only a slight increase in the PHSI of 0.1%, with the index reaching 83.6 in August. However, that was a drop of 5.3% from the previous year. The Northeast was the only region to register a month-over-month index pullback, with a drop of 4.6% to 61.6. The reading was also down 2.2% from a year ago.
However, there is confidence that continued interest rate cuts by the Federal Reserve will impact home loan rates going forward, increasing the buying power of those looking for a home.
“The Federal Reserve does not directly control mortgage rates, but the anticipation of more short-term interest rate cuts has pushed long-term mortgage rates down to near 6% in late September,” Yun said. “On a typical $300,000 mortgage, that translates to approximately $300 per month in mortgage payment savings compared to a few months ago.”
