Pending home sales diminish in August
After seeing a slight improvement in July, pending home sales declined in August.
Pending home sales fell 7.1% for the month, the National Association of Realtors reported this morning.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – sank 7.1% to 71.8 in August.
“Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers,” said 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.”
Last month, the PHSI edged ahead by 0.9% after posting a flat reading in June.
On a year-over-year basis, pending transactions fell by 18.7%. An index of 100 is equal to the level of contract activity in 2001.
“It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” Yun noted.
Here’s how pending home sales performed on a regional basis:
- 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 in August, down 19.1% from one year ago.
- The South PHSI fell 9.1% to 86.5 in August, dipping 17.6% from the prior year.
- The West index retreated 7.7% in August to 56.3, sinking 21.4% from August 2022.
According to Yun, a move by the Federal Reserve to raise interest rates again would be the wrong play.
“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.,”Yun said. “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.”
Earlier this week the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that new home sales fell 8.7% to a seasonally adjusted annual rate of 675,000 in August. The July rate for new home sales was revised to 739,000.
The National Association of Home Builders also pointed to high mortgage rates for lesser sales despite a lack of existing-home inventory on the market.
The latest new home sales figure is 5.8% above the August 2022 estimate of 638,000, however.
