Pending-home sales unexpectedly tick up despite high rates

Pending sales of existing U.S. homes picked up slightly in August, though they remained subdued as high mortgage rates continue to suppress demand. 

An index of contract signings increased 0.3% to 71.2 last month, rising for the first time since May, according to National Association of Realtors data released Thursday. Economists surveyed by Bloomberg expected the index to fall by 0.1%. 

"Buyers steadily entered into contracts in August even though mortgage rates increased," NAR Chief Economist Lawrence Yun said in a statement. "However, the housing market is still sluggish, with contract signings below last year."

David Ryder/Bloomberg

Compared to a year ago, pending home sales are down nearly 5%. 

The figures point to lingering pent-up demand for previously owned homes, as buyers who may have been waiting for lower mortgage rates finally gave in and purchased a home. However, there is little evidence the housing market is picking up. 

Mortgage rates have been climbing since the start of the war with Iran and nearly hit 7% in the week ended Sept. 11, according to Mortgage Bankers Association figures. Rates could go even higher. Home borrowing costs closely track the 10-year US Treasury yield, which climbed earlier this week to the highest level in almost two decades.

Contract signings generally occur a month or two before closings and historically have provided a forward look at existing-home sales.

Across the US, pending sales in the South, the nation's biggest home-selling region, increased 2.3%. Sales also rose in the West. The Midwest and Northeast posted declines. 

Separately, federal government data released Thursday showed U.S. housing starts fell last month to one of the weakest paces since the pandemic, reflecting a plunge in multifamily construction.