With higher mortgage interest rates slowing the U.S. housing market, the National Association of Realtors released a report on Wednesday showing that pending home sales fell by more than expected in the month of July.
NAR said its pending home sales index fell 1.3 percent to 109.5 in July after dipping 0.4 percent to 110.9 in June. Economists had been expecting the index to drop by about 1.0 percent.
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.
With the bigger than expected decrease, the pending home sales index pulled back further off the six-year high set in May.
Despite the monthly decrease, however, the pending home sales index is up by 6.7 percent compared to July of 2012, reflecting the twenty-seventh month of year-over-year growth.
Lawrence Yun, NAR chief economist, said, "The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown."
"However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West," he added. "More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems."
The report said pending home sales in the Northeast and the West fell by 6.5 percent and 4.9 percent, respectively.
Pending home sales in the Midwest dropped by a more modest 1.0 percent, while pending home sales in the South rose by 2.6 percent.
NAR said it expects existing home sales to increase by 10 percent for all of 2013, totaling about 5.1 million. Existing home sales are expected reach approximately 5.2 million next year.
The trade association also said it expects existing home prices to grow nearly 11 percent this year before moderating to show an increase of 5 to 6 percent in 2014.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.