Rising interest rates, low inventory, increasing home prices and tighter lending standards combined to result in a 1.6% decrease in mortgage contract signings in August, the National Association of Realtors (NAR) reports.
The NAR's Pending Home Sales Index, which measures contracts but not closings, fell to 107.7 in August from a downwardly revised 109.4 in July, but remains 5.8% above August 2012 when it was 101.8.
Despite the dip, pending sales have been above year-ago levels for the past 28 months.
‘Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month,’ said Lawrence Yun, chief economist for the NAR. ‘Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead.’
In the Northeast, contract singings increased 4% in August, compared to July, and were up 5.1% compared to August 2012.
In the Midwest, contract signings declined 1.4%, compared to July, but were 13.8% higher than in August 2012.
In the south, pending home sales fell 3.5% in August, compared to July, and were nevertheless 3.7% above a year ago.
In the west, contract signings declined 1.6% in August, month-over-month, but were 1.7% higher compared to a year ago.
Last week, the NAR reported that existing home sales rose 1.7% on a seasonally adjusted basis in August, compared to the previous month.
Yun said, at the time, that home sales may have temporarily peaked due to rising mortgage rates.
‘Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,’ Yun said. ‘Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn't as favorable as it was, and restrictive mortgage-lending standards are keeping some otherwise qualified buyers from completing a purchase.’
Still, existing-home sales in August reached the highest level since February 2007, when they hit 5.79 million. Roughly 5.48 million homes were sold, up from 5.39 million in July and up 13.2% from the 4.84 million sold in August 2012.
The NAR is forecasting that home sales will increase less than 1% in 2014.
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