Americans signed more contracts to buy existing homes in August compared to the previous month, according to the National Association of Realtors (NAR), which released its monthly pending home sales index today.

The index, which measures contracts signed to purchase existing homes, rose 6.4 percentage points from July to a reading of 93.4 at summer’s end. That figure stands 8 percentage points above its August 2007 mark of 85.8.

“What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region,” said Lawrence Yun, chief economist at NAR. "It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”

Some suspect those enticing low prices are coming from foreclosed homes. “While the August pending home sales index rose 7.4 percent … we believe this was largely driven by the continued rise in foreclosure sales, particularly in California,” noted Michael Rehaut, housing analyst at JPMorgan, who predicts a similar national improvement in September existing-home sales when they are reported.

That makes today’s index reading a mixed bag for new-home builders. While the NAR data appears to be a sign of improvement for the wobbling housing market, it also underscores the difficulty builders are encountering when selling their product against bargain-priced foreclosures.

Alison Rice is senior editor, online, at BUILDER magazine.

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