Key Takeaways
- Pending home sales rose 0.6% in August, bouncing back slightly from the record low they hit in July.
- Forecasters had expected a 1% increase as falling mortgage rates have improved affordability in recent months.
- Despite a recent drop in mortgage rates, home ownership remains unaffordable for many buyers, so they’re sitting on the sidelines, waiting for better prices or mortgage rates.
Pending home sales bounced back in August from a record low, but the bounce was more like a deflated thud than the modest rebound forecasters had anticipated.
Pending home sales, a forward-looking measure based on purchase contract signings, rose 0.6% in August from July, the National Association of Realtors said Thursday. The uptick left the index still close to the all-time low it hit in July and was less than the 1% increase forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.
The slow sales highlight how high prices and mortgage rates hurt the housing market. According to housing affordability measures by the association and the Federal Reserve Bank of Atlanta, monthly mortgage payments for typical homes are out of reach for buyers with typical incomes.
Mortgage rates have fallen recently as the Federal Reserve has moved to slash borrowing costs, but rates are still far higher than the ultra-low ones available during the pandemic. The average mortgage rate fell to 6.09% last week, below the recent peak of 7.79% last October, but far above the 2021 low of 2.65%. The drop hasn’t been enough to bring priced-out buyers back into the market. Lower mortgage rates have also enticed more owners to put their homes up for sale, though inventory remains below pre-pandemic levels.
“Despite having more buying power and more for-sale home options, buyers are proceeding cautiously, perhaps waiting to see homeownership costs soften further,” Hannah Jones, economic research analyst at Realtor.com, said in a research note.