Key facts
- Pending home sales index rose 0.3% to 71.2 in August.
- Economists had forecast a 0.6% decline in contracts.
- Pending home sales were down 4.7% year-on-year in August.
- The 30-year fixed mortgage rate averaged 6.76% last week.
- Contract signings are running roughly 30% below pre-pandemic levels.
Contracts to purchase previously owned U.S. homes unexpectedly increased in August, but the gain is expected to be temporary as high mortgage rates continue to deter potential buyers and dampen housing demand. The National Association of Realtors reported that its pending home sales index rose 0.3% to 71.2 last month, surpassing economists' forecasts of a 0.6% decline. Contracts saw increases in the South and West regions, while declining in the Northeast and Midwest.
Despite the monthly increase, pending home sales were down 4.7% compared to August of the previous year. Mortgage rates remained elevated throughout August and have continued to climb in recent weeks, influenced by a surge in longer-term U.S. Treasury yields. These yields have been pushed higher by inflation concerns, uncertainty surrounding the Federal Reserve's policy response, and a growing national debt, with the benchmark 10-year Treasury yield hovering around 5.0%.
The Federal Reserve recently raised interest rates for the first time since July 2023. Data from Freddie Mac indicated that the average 30-year fixed mortgage rate was 6.76% last week, marking its highest level in over a year and an increase from 6.71% the week prior. Lawrence Yun, the NAR's chief economist, noted that national contract signings are currently about 30% below the levels seen in the years leading up to the pandemic, a period when mortgage rates were near historic lows of around 3%.