A slow but steady decline in mortgage rates in August led to more buyers signing contracts to purchase existing single-family homes and condos.
Pending sales of these properties increased 4% during the month, according to data the National Association of Realtors released Monday. Since the same time period a year earlier, contracts increased 3.8%. These figures could be a sign that actual sales are expected to rise over the next two months, since deals usually take 30 to 60 days to close.
“Lower mortgage rates are enabling more homebuyers to go under contract,” NAR Chief Economist Lawrence Yun said in a statement.
Actual sales of existing homes fell in August, as buyers didn’t appear to be responsive to the gradual decline in mortgage rates at that point.
August saw other positive signs for buyers, the Mortgage Bankers Association said last week, as the median monthly payment amount that home loan applicants had requested dropped $27 to $2,100.
“Affordability conditions have improved for four straight months, with lower mortgage rates and stronger income growth boosting prospective buyers’ purchasing power,” Edward Seiler, MBA's associate vice president, said in a statement Thursday.
Contracts to sell homes increased in August from the previous month in three of the four major U.S. regions, with the more affordable Midwest leading the way at 8.7% and the West up 5%. The South also increased 3.1%, while in the Northeast, pending sales fell 1.1%.
Since August 2024, contracts have risen 6.7% in the Midwest, 4.2% in the South, 2.6% in the Northeast and 0.2% in the West.
Nineteen percent of agents are optimistic they’ll see an increase in buyer activity over the next three months, according to a monthly NAR survey, up from 16%. Fewer agents reported they anticipate a rise in seller traffic, however.
Existing homeowners should be ready to make deals with buyers, as indicated not only by a steady increase in the supply of homes for sale, but also by sellers’ strong financial position, Ryan Sweet, chief economist for Oxford Economics, said in a statement Monday. Sellers across the U.S. have accumulated a cumulative $36 trillion in real estate equity, much of it since the pandemic, he said. That should mean they don’t necessarily feel locked in by the low mortgage rates they obtained when they bought their homes and are open to selling now.
“The noticeably larger than anticipated increase in pending-home sales between July and August is a tentative sign that the housing market is beginning to thaw and we haven’t reaped the benefits of the recent slide in mortgage rates,” Ryan Sweet, chief economist for Oxford Economics, said in a statement Monday.