WASHINGTON (Reuters) - Contracts to buy U.S. 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 its Pending Home Sales Index, based on signed contracts, dropped 2.0% to 88.4 last month, the lowest level since April 2020. Contracts have declined in nine 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%. Pending home sales plunged 24.2% 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 U.S. central bank last week raised its policy interest rate by 75 basis points, its third straight increase of that size.
It signaled 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% to 3.25%.
Mortgage rates have increased even faster. The 30-year fixed mortgage rate averaged 6.29% last week, the highest since October 2008, from 6.02% in the prior week, according to data from mortgage finance agency Freddie Mac (OTC:FMCC).
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% on a year-on-year basis in July, slowing from an 18.1% advance in June. On a monthly basis, prices fell 0.3% in July, the first drop since late 2018.