Pending home sales in the U.S. dropped by much more than expected in the month of August, according to a report released by the National Association of Realtors on Thursday.
NAR said its pending home sales index tumbled by 1.8 percent to 104.2 in August after falling to 106.1 in July. Economists had expected pending home sales to fall by 0.4 percent.
With the much bigger than expected monthly decrease, pending home sales in August were down by 2.3 percent compared to the same month a year ago.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months,” said NAR chief economist Lawrence Yun.
He added, “The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.”
The report said pending home sales in the West plunged by 5.9 percent in August. Pending home sales in the Northeast also slumped by 1.3 percent, while pending sales in the South and Midwest fell by 0.7 percent and 0.5 percent, respectively.
NAR said Yun expects existing home sales this year to decrease by 1.6 percent to 5.46 million, as the national median existing home price is expected to increase by 4.8 percent.
Looking ahead to next year, existing home sales are forecast to rise by 2 percent and home prices are expected to jump by around 3.5 percent, NAR said.