WASHINGTON (9/27/13)--U.S. pending home sales declined in August, while mortgage interest rates in the month continued to rise, two separate reports indicated.
Pending home sales slowed in August, with tight inventory conditions, higher interest rates, rising home prices and continuing restrictive mortgage credit impacting the market, according to the National Association of Realtors (NAR).
The Pending Home Sales Index, a forward-looking indicator based on contract signings, eased 1.6% to 107.7 in August from a downwardly revised 109.4 in July, but remains 5.8% above August 2012 when it was 101.8. The data reflect contracts but not closings. Pending sales have been above year-ago levels for the past 28 months.
The decline was expected following elevated levels of closed existing-home sales at the end of summer, said Lawrence Yun, NAR chief economist. "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," he explained. "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."
Meanwhile, interest rates on mortgages continued their upward trend. Contract mortgage interest rates increased 0.25% from July to August, according to a Federal Housing Finance Agency (FHFA) index of new mortgage contracts.
The National Average Contract Mortgage Rate Index for previously occupied homes sales by combined lenders was 4.26% for loans closed in late August. The index is calculated using FHFA's Monthly Interest Rate Survey. The contract rate on the composite of all mortgage loans was 4.25%, up 25 basis points from 4% in July.
Interest rates are typically locked in 30-45 days before a loan is closed. Consequently, August
data reflect market rates from mid-to-late July.