A report released by the National Association of Realtors on Wednesday showed a steep drop in pending home sales in the U.S. in the month of August.
NAR said its pending home sales index plunged by 2.6 percent to 106.3 in August from 109.1 in July. The index had been expected to dip by 0.5 percent.
With the much bigger than expected decrease, the pending home sales index dropped to its lowest reading since hitting 106.1 in January of 2016.
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.
"August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes," said NAR chief economist Lawrence Yun.
He added, "Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search."
The report showed notable decreases in pending home sales in the Northeast and South, where pending home sales slumped by 4.4 percent and 3.5 percent, respectively.
Pending home sales in the Midwest also dropped by 1.5 percent, while pending home sales in the West declined by 1.0 percent.
NAR said slower activity in the areas hit hard by Hurricanes Harvey and Irma will likely pull existing sales for the year below the pace set in 2016.
Yun now forecasts existing home sales to close out the year at around 5.44 million compared to 5.45 million last year.
by RTT Staff Writer
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