Pending Home Sales Rise in August as Falling Mortgage Rates Finally Spur Activity

Pending sales of existing homes rose in August, as a decline in mortgage rates helped spur activity in the housing market.

Pending sales, based on signed contracts, rose 4% last month from July and increased 3.8% from a year earlier, the National Association of Realtors® reported Monday.

On a monthly basis, pending sales rose month over month in the Midwest, South, and West, and declined in the Northeast. Sales rose annually in all four regions.

Pending sales precede closings by one to two months, and the uptick in August could signal a boost in completed sales to start off the fall homebuying season, following a weak summer.

The uptick came as average mortgage rates eased to 6.59% in August, down modestly from 6.72% in July, according to Freddie Mac. Rates have since fallen further and averaged 6.3% as of last week.

"While lower borrowing costs provided some relief, high housing costs continue to limit overall movement in the market," says Realtor.com® Senior Economic Research Analyst Hannah Jones.

Despite the August uptick, pending home sales as measured by the NAR remain well below the typical levels recorded in the 20 years prior to late 2021, when sales fell off a cliff—and have yet to recover.

In addition to harsh affordability conditions, a dearth of supply has limited choices for buyers. While inventory has improved significantly in the South and West, it remains tight in the Midwest and Northeast compared to pre-pandemic levels.

Although supply has been rising nationally, BrightMLS Chief Economist Lisa Sturtevant warns that "it is possible that inventory could actually shrink this fall, and that is another reason why we should expect a slow fall housing market."

Sturtevant notes recent data showing a surge of delistings as sellers pull their unsold homes off the market, suggesting that sellers who can't get their desired price are opting to wait rather than negotiate.

"The uptick in delisting activity reflects the transitioning housing market, as would-be sellers take their home off the market when they are not getting offers at the price they had hoped for,” she says.

Last week, separate data from NAR showed that sales prices for existing homes continued to rise last month, jumping 2% annually to $422,600.

Closed sales for existing homes fell 0.2% last month from July to a seasonally adjusted annual rate of 4 million, matching the slowest sales annual rate since 1995.

It meant the home resale market remains on track for one of its worst years for sales in three decades, unless activity picks up this fall.