US Pending Home Sales Remain Near Record Low in August, According to NAR, Reported by Reuters

Contracts for previously owned homes in the U.S. saw a slight increase in August compared to the record-low levels experienced in July, aided by a decrease in mortgage interest rates. This decline, occurring amid expectations of Federal Reserve rate cuts, offered a modest improvement in housing affordability.

The National Association of Realtors (NAR) reported that its Pending Home Sales Index, which measures signed contracts, rose by 0.6% in August, reaching 70.6, a slight uptick from July’s 70.2, the lowest figure recorded since the index began in 2001. Economists had predicted a 1.0% increase based on their forecasts.

Regionally, pending home sales increased in the West, South, and Midwest, while the Northeast experienced a decline. However, the year-over-year sales rate continued to decrease, showing a 3.0% drop compared to August 2022.

Lawrence Yun, NAR’s chief economist, noted that the modest rise indicates a small improvement in housing affordability, primarily due to mortgage rates falling to 6.5% in August. This decrease correlated with a drop in the yield on the 10-year Treasury note, which is commonly used as a benchmark for mortgage rates, as expectations mounted for a Fed rate cut during its September meeting. The Fed ultimately enacted a more significant reduction than anticipated, cutting rates by 50 basis points and signaling the possibility of further cuts in the future. Consequently, mortgage rates have since approached 6%.

Despite this positive movement, sales activity is likely to remain sluggish. Ongoing increases in home prices are offsetting some of the savings from lower borrowing costs, and inventory levels remain tight.

Yun also mentioned that the situation regarding affordability may improve in the coming months. With the current 30-year fixed-rate mortgage hovering around 6%, buyers purchasing a $300,000 home could save approximately $300 per month compared to just a few months prior.