The rising mortgage rates appear to finally be having an effect on home sales. Fewer options for prospective buyers, more expensive monthly payments and rising prices have all shifted the current state of the housing market.
Pending home sales dropped in August, according to the National Association of Realtors. The data is often used as an indicator of future activity in the segment. While the figures dropped on a month-to-month basis, when compared to last year pending home sales were still up 5.8 percent.
"Sharply rising mortgage interest rates in the spring motived buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month," said Lawrence Yun, chief economist for NAR. "Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."
Currently, it looks like little changes in home sales are expected over the next year, NAR reported. However, inventory is forecasted to increase slightly over that time.
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Home prices trending up
Even as pending home sales headed down, home prices were on the rise, according to the recent S&P/Case-Shiller Home Price Indices.
Overall, the data reported an increase of 1.9 percent for the 10-City composite, and growth of 1.8 percent for the 20-City composite. The past year has been significant as well. In total, prices rose more than 12 percent for both composites. Las Vegas was the metro area with the biggest gains at more than 24 percent, S&P/Case-Shiller noted.
David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, explained that the monthly rates of price gains have slowed, which suggests that the peak of the increases may have passed.