Less Americans signed contracts last month to purchase existing homes. This was an indicator that increasing mortgage rates have started to slow momentum in the housing market. The index of pending home sales fell 1.3 percent, which was the most this year. It came after a 0.4 percent decrease in June. The data was released by the National Association of Realtors. Economists estimated no change in the gauge according to a Bloomberg poll.
Mortgage rates are at a two year high and the inventory of existing homes has led prospective buyers out of the market that threatened to slow the pace of the real estate recovery. Improvements in employment and income growth had helped provide additional fuel for housing that has become a source of strength for the economy.
The Bloomberg survey of 38 economists for pending home sales called for a decline of 3 percent to an increase of 5.3 percent. The Standard & Poor’s Supercomposite Homebuilding Index fell 1.2 percent. The S&P 500 increased 0.2 percent to 1,633.23 after it dropped to an eight week low the previous day due to concern about a possible military attack against Syria.
The Realtors’ report showed home purchases went up8.6 percent from July 2012 on an unadjusted basis. The pending sales index was 109.5 on a seasonally adjusted basis, which was the lowest in three months. A reading of 100 is the average level of contract activity in 2001 and seen as healthy home buying traffic.
Three of four regions indicated a decrease from the previous month that was led by the 6.5 percent decline in the Northeast. The reading dropped 4.9 percent in the West and 1 percent in the Midwest. Pending sales increased 2.6 percent in the South.
The realtors’ group said sales of previously owned homes increased in July, which is the second highest level in more than six years. This was attributed to the rush as buyers try to lock in mortgage rates before they rise further.