US pending home sales post third straight monthly decline in August
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CONTRACTS to buy US previously owned homes fell for a third straight month in August, weighed down by soaring mortgage rates and high house prices, which are eroding affordability.
The National Association of Realtors (NAR) said on Wednesday (Sep 28) its Pending Home Sales Index, based on signed contracts, dropped 2.0 per cent to 88.4 last month, the lowest level since April 2020. Contracts have declined in 9 of the last 10 months.
In August, contracts fell in the Northeast, South and Midwest, but rose in the West.
Economists polled by Reuters had forecast contracts, which become sales after a month or two, would fall 1.4 per cent. Pending home sales plunged 24.2 per cent in August on a year-on-year basis.
The Federal Reserve’s aggressive monetary policy tightening, marked by oversized interest rate increases, has significantly weakened the housing market. The US central bank last week raised its policy interest rate by 75 basis points, its third straight increase of that size.
It signalled more large increases to come this year. Since March, the Fed has hiked its policy rate from near zero to the current range of 3.00 per cent to 3.25 per cent.
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Mortgage rates have increased even faster. The 30-year fixed mortgage rate averaged 6.29 per cent last week, the highest since October 2008, from 6.02 per cent in the prior week, according to data from mortgage finance agency Freddie Mac.
The drop in signed contracts in August suggested that existing home sales would continue to decline in the months ahead. Home resales decreased for a seventh straight month last month.
Though house price growth is slowing in response to weak demand, home prices remain high.
Data on Tuesday showed the S&P CoreLogic Case-Shiller national home price index increased 15.8 per cent on a year-on-year basis in July, slowing from an 18.1 per cent advance in June. On a monthly basis, prices fell 0.3 per cent in July, the first drop since late 2018. REUTERS
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