Housing recovery stumbles as pending home sales slide
So-called pending home sales dropped 1.6 percent month-to-month in August as rising interest rates and higher prices took their toll on demand.
U.S. home buyers signed fewer contracts to buy existing homes in August, as higher mortgage rates and higher home prices weighed on housing affordability. So-called pending home sales fell 1.6 percent month-to-month, according to the National Association of Realtors, but are still 5.8 percent higher from a year ago.
The Realtors warned earlier this month that the increase in closed home sales in August (signed contracts in June or July) was the "last hurrah" as agents were reporting a steep drop in buyer traffic in August. These pending contracts generally take one to two months to close and therefore indicate slower final sales for the fall.
"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 Realtors. "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."
The Northeast was the only region to see an increase in pending home sales, up 4.0 percent month-to month. Sales declined 1.4 percent in the Midwest, fell 3.5 percent in the South and fell 1.6 percent in the West. The Realtors are predicting total existing home sales to be up about 11 percent I n2013 to 5.2 million homes sold but expect little change from that pace in 2014.