Although homebuying activity has improved so far this year, a recent decline in consumer confidence could weigh heavily on future rates.
The U.S. consumer confidence level in August edged lower to a mark of 60.6 out of 100, down from 65.4 in July, according to a report from the Conference Board. Rising gasoline prices and a stagnant unemployment rate above 8 percent may have been key factors in this development. Consumer confidence is now at the lowest level since November 2011.
"Strained household balance sheets, a soggy economy and a sluggish labor market are the probable causes behind the sharply negative view," said Bloomberg senior economist Joseph Brusuelas said.
Consumers' future expectations are also weak, the report said. As a result, household spending could decline an additional 2 percent during the remainder of the year, Brusuelas added. In addition, a mark of 60.6 was surprising to a number of experts after a previous survey conducted by Bloomberg anticipated the score to range between 61 and 68.
Despite decline, future home sales promising
The Pending Home Sales Index, which is an indicator of potential transactions in the coming months, surged 9.5 percent in June on an annual basis to 99.3, according to the National Association of Realtors. A score of 100 indicates conditions prior to the real estate bubble burst.
"Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities," said NAR chief economist Lawrence Yun. "We've been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors."
Regionally, property data indicates pending home sales in the Northeast rose 12.2 percent from a year earlier, while the Midwest experienced a 17.3 percent gain during the same period. In addition, the South saw the future sales rate spike 8.8 percent, as the West posted the smallest increase of 3 percent.
Although consumer confidence took a hit in August, housing affordability continues to hover near an all-time high. Affordability is based on the relationship between mortgage rates, which have remained below 4 percent for all but one week so far this year, median household incomes and property values still roughly 30 percent below peak levels in some areas.