Pending home sales inched up 0.6% in August, driven by improvements in the Midwest, South, and West, 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—generated a reading of 70.6 in August. An index level of 100 is equal to the level of contract activity in 2001. On a year-over-year basis, pending transactions were down 3.0%.
“A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August,” NAR chief economist Lawrence Yun says. “However, contract signings remain near cyclical lows even as home prices keep marching to new record highs.”
In the Northeast region, the PHSI decreased 4.6% on a month-over-month basis and 2.2% compared to August 2023. The Midwest index rose 3.2% compared to the previous month, but was down 3.6% on a year-over-year basis.
“In terms of home sales and prices, the New England region has performed relatively better than other regions in recent months,” Yun says. “Contract signing rose in both the most affordable and most expensive regions—the Midwest and the West, respectively—because mortgage rates have fallen nationally.”
Pending sales in the South marginally increased 0.1% in August, but fell 5.3% compared to August 2023. The West index rose 3.2% compared to July and 2.7% compared to August 2023.
“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 near 6% in late September,” Yun says. “On a typical $300,000 mortgage, that translates to approximately $300 per month in mortgage payment savings compared to a few months ago.”
