Pending home sales slid 7.1% in August, according to the National Association of Realtors (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, decreased to 71.8 in August. Year over year, pending transactions fell by 18.7%.
“Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers," says Lawrence Yun, NAR chief economist. "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."
All four U.S. regions posted monthly losses and year-over-year declines in transactions.
The Northeast PHSI declined 0.9% from last month to 62.6, a reduction of 18.2% from August 2022. The Midwest index dropped 7% to 71.3, down 19.1% from one year ago. The South PHSI fell 9.1% to 86.5, dipping 17.6% from the prior year. The West index retreated 7.7% to 56.3, sinking 21.4% from August 2022.
"It's clear that increased housing inventory and better interest rates are essential to revive the housing market," adds Yun. "The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates. Moreover, the government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance.”