US Pending Home Sales Rise 4 Percent in August, Reversing July Decline

The month-over-month figure represents a significant reversal from July’s 0.4 percent decline and exceeds the consensus estimate of a 0.3 percent increase.

A sale pending sign is posted in front of a home for sale in San Anselmo, Calif., on March 18, 2022. Justin Sullivan/Getty Images

U.S. pending home sales rose 4 percent month-over-month in August, a significant reversal from July’s 0.4 percent decline and well above the consensus estimate of a 0.3 percent increase, according to a Sept. 29 report from the National Association of Realtors (NAR).

Pending home sales rose 3.8 percent year-over-year in August, according to the report, which tracks national data on homes under contract.

Sales are listed as “pending” when the contract has been signed, but the transaction has not yet closed.

“Lower mortgage rates are enabling more home buyers to go under contract,” Lawrence Yun, chief economist at NAR, said in the report. “In the Midwest, low mortgage rates combined with high levels of affordability are attracting more buyers compared to other regions.”

The Midwest, South, and West all experienced a spike in pending sales from July, while the Northeast declined, the report shows. Year-over-year pending sales, however, rose across all regions.

The Midwest experienced the largest jump in month-over-month pending sales, at 8.7 percent, and a 6.7 percent year-over-year advance.

The West showed a 5 percent month-over-month hike and a 0.2 percent year-over-year growth.

In the South, pending home sales increased 3.1 percent month over month and 4.2 percent year over year.

The Northeast, meanwhile, showed a 1.1 percent month-over-month decline, but a 2.6 percent year-over-year increase in pending sales.

In the August Realtors Confidence Index survey, included in the pending home sales report, 19 percent of NAR members responded that they expect an increase in buyer traffic over the next three months, up from 16 percent last month. Another 19 percent indicated they expect increased seller traffic—down from 21 percent in the previous month.

Meanwhile, a recent study from national home services firm Renuity found that about half of first-time homebuyers surveyed indicated they were bypassing the traditional “starter home” and opting for something smaller, like a condo or townhouse, or a larger “fixer-upper.”

The report found that the entry market is tight, and 85 percent felt starter homes were overpriced or already scooped up by investors. Around 32 percent shared that they didn’t want to outgrow a “starter home,” and 31 percent revealed they actually qualified for a larger loan.

Of those who purchased homes needing repairs, 53 percent reported renovation costs were higher than expected.

More than 43 percent said they chose to buy because they were tired of renting and wanted to own a home, while 35 percent reported they wanted to build equity for the long term. Other reasons for buying included stability, at 31 percent, and more space, at 23 percent.

Around 79 percent purchased a detached single-family home, often older homes in need of some repairs.

Adding mortgage and real estate tax payments to their monthly budgets required some compromises for first-time buyers. Many reporting buying older homes in need of renovations, or homes with fewer amenities or longer commutes to work. Some settled for less desirable neighborhoods or smaller lot sizes.