WASHINGTON (AP) — More Americans signed contracts to buy homes in August, signaling that low mortgage rates may spark a sustained turnaround for the housing market.
The National Association of Realtors said Thursday that its pending home sales index rose 1.6% to 107.3 in August. Pending home sales, which reflect purchases that are usually completed a month or two later, are up 2.5% from their pace a year ago.
Lower borrowing costs have been slowly boosting buyer demand. Persistently high prices, driven up by a tight supply of available homes, had previously blunted the benefits of low mortgage rates. Demand has fluctuated slightly over the past few months as home prices have risen, with contract activity dipping in July.
Many economists say they are optimistic that low mortgage rates will reverse the trend. Daniel Silver, an economist at JP Morgan Chase Bank, said the index was another sign that the housing market may be regaining momentum.
“Many other housing indicators also have firmed (to varying degrees) this year, and we think that the drop in mortgage rates relative to late last year has helped boost activity in the housing market,” Silver said in a note.
Still, most analysts say home construction, which has been squeezed by a shortage of land and labor, will also need to pick up for the market to fully recover. So far, builders have focused primarily on the higher end of the market, driving the average price of housing in August to a government-reported record level of $404,200.
Measured month over month, pending sales rose across all four regions in August, especially in the comparatively expensive West, where contract activity rose 3.1%. Sales in the West also surged the most when measured year over year, with a gain of 8%.
“The notable sales slump in the West region over recent years appears to be over,” said Lawrence Yun, chief economist of the NAR. “Rising demand will reaccelerate home price appreciation in the absence of more supply.”