Slightly lower mortgage rates may have given more home buyers the confidence to move forward on a home purchase in August, offering a hopeful sign for more closed sales this fall. The National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 4% in August and was up by 3.8% compared to a year ago.
Lawrence Yun, NAR’s chief economist, credited the increase in contract signings to drops in mortgage rates, which have fallen below 6.5% recently.
“Lower mortgage rates are enabling more home buyers to go under contract,” Yun says. “In the Midwest, low mortgage rates combined with higher levels of affordability are attracting more buyers compared to other regions.”
Indeed, NAR’s latest existing-home sales report has shown resilience in the housing market this summer in the Midwest. The region boasts median home prices 22% below national averages ($330,500, as of August). The Midwest was also the top-performing region in the U.S. for existing-home sales in August, as well as for pending home sales. Contract signings in the Midwest in August climbed a notable 8.7% higher than July and are up by 6.7% compared to a year ago—performing much stronger than other regions of the country.
Overall, the latest uptick nationwide in contract signings comes as a welcome sign for a housing market that has mostly struggled this summer to make meaningful gains in home sales.
“Home sales have been sluggish over the past few years due to elevated mortgage rates and limited inventory,” Yun said in announcing last week that existing-home sales fell 0.2% in August compared to July. “However, mortgage rates are declining, and more inventory is coming to the market, which should boost sales in the coming months.”
In another hopeful sign for the market, mortgage applications for home purchases—a gauge of future home buying activity—is up 18% compared to a year ago, according to the Mortgage Bankers Association’s latest report. Meanwhile, mortgage rates have retreated from their near-7% highs earlier this year, averaging 6.30%, as of Sept. 25, according to Freddie Mac’s mortgage market index.
Regional Outlook
Here’s a closer look at how pending home sales fared in August across the country:
- Northeast: Contract signings fell 1.1% month-over-month but were 2.6% higher than a year ago.
- Midwest: Pending home sales surged 8.7% in August and were 6.7% higher than a year ago.
- South: Contract signings rose 3.1% last month and were up 4.2% compared to August 2024.
- West: Contract signings increased 5% month-over-month and were up slightly by 0.2% compared to a year ago.
