Contracts to buy U.S. existing homes fell more than expected in August, tumbling by the most in nearly a year as high mortgage rates erode affordability, according to a survey released Thursday.
The National Association of Realtors' Pending Home Sales Index fell 7.1% to 71.8 from July's revised 77.3. The decrease, the largest since September 2022, exceeded the median economist forecast for a 0.8% fall, according to a Reuters poll.
On a year-over-year basis, pending sales were down 18.7%.
The fall occurred as buyer affordability continued to decline last month. The average mortgage payment rose to $2,170 in August, up $331 - or 18% - year-over-year, according to another data published on Thursday by the Mortgage Bankers Association.
The weekly average rate on a 30-year fixed mortgage has remained above 7% since early August following the Federal Reserve's campaign to raise interest rates in an aggressive effort to curb inflation.
“Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets," said Lawrence Yun, the NAR's chief economist. "It's clear that increased housing inventory and better interest rates are essential to revive the housing market."
Pending sales of existing homes slid by the most in the South and West regions. The Northeast region experienced the smallest drop in contracts signed with a 0.9% fall.
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