Pending home sales close summer on a high note

After falling in June and July, pending home sales were up in August, according to data published Monday by the National Association of Realtors (NAR).

NAR’s Pending Home Sales Index rose 4.0% month over month in August to a reading of 74.7. This also represents a 3.8% increase compared to a year ago.

An index reading of 100 is equal to the level of contract activity in 2001.

“August pending sales activity provides a preview for fall closed sales,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “And while new pending contract activity rose in August, closed sales over the next few months will likely still be around last year’s levels.”

Regionally, the level of contract signing was down month-over-month in the Northeast (1.1%), but up in the Midwest (8.7%), South (3.1%), and West (5.0%). All four regions posted annual increases, with the Midwest ( 76.4) posting the largest increase at 6.7%, followed by the 4.2% increase in the South (88.9), a 2.6% jump in the Northeast (63.7) and a 0.2% rise in the West (59.3).

“Lower mortgage rates are enabling more homebuyers to go under contract,” Lawrence Yun, NAR’s chief economist, said in a statement. “In the Midwest, low mortgage rates combined with high levels of affordability are attracting more buyers compared to other regions.”

Sturtevant added that on top of lower mortgage rates, buyers in August also had the benefit of more inventory on the market. However, she warned that inventory levels could shrink this fall, which is why she is expecting a slow fall housing market.

“A recent analysis by Bright MLS has shown an increase in the number of sellers who are pulling their homes off the market,” she said. “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.”

Odeta Khushi, the deputy chief economist at First American, has a more optimistic view.

“Purchase mortgage application data from September indicates additional momentum, with buyers responding to lower rates. This suggests that the modest improvement in pending sales may continue into the fall, especially if affordability conditions stabilize,” Khushi said in a statement.

“Looking ahead, sales this year will likely depend on “life happens” moments — job changes, marriages, births, and other personal milestones that drive housing decisions. Affordability challenges and structural inventory shortages continue to weigh on buyer activity. Lower rates help, but they are not a panacea for the housing market.”

When it comes to how Realtors believe the end of the year will play out, NAR’s Realtors Confidence Index showed that 19% of NAR members expect buyer traffic to increase in the next three months.

This metric is up from 16% a month prior and the same as a year ago. When it comes to seller traffic 19% of respondents expect to see an increase over the next three months, down from 21% a month ago, but up slightly from 18% a year prior.