Pending home sales drop to lowest since start of the pandemic

(Bloomberg) -- U.S. pending home sales fell in July for the sixth time this year to the lowest level since the start of the pandemic, extending the housing market's sharp downturn as high borrowing costs sideline prospective buyers.

The National Association of Realtors' index of contract signings to purchase previously owned homes decreased 1% from a month earlier to 89.8, according to data released Wednesday. That followed a nearly 9% decline in June. 

The median estimate in a Bloomberg survey of economists called for a 2.6% drop in July.

High home prices and a run-up in mortgage rates this year have pushed homeownership out of reach for many would-be buyers. The pullback has been swift and severe, with a range of measures pointing to weaker sales and construction activity.

The monthly bill on a typical home with a 20% down payment rose to $1,841 in the second quarter, according to a separate NAR report out earlier this month. That's up 32%, or $444, from the first quarter and a 50% jump from a year earlier.

"This month's very modest decline reflects the recent retreat in mortgage rates," Lawrence Yun, NAR's chief economist, said in a statement. "Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity."

While borrowing costs eased in July, the average contract rate on a 30-year fixed mortgage has crept back up in August, according to recent data from the Mortgage Bankers Association.

Contract signings decreased in three of four regions, led by a 2.7% drop in the Midwest. Pending home sales rose in the West.

Compared with a year earlier, contract signings were down 22.5% on an unadjusted basis.

Pending home sales are often looked to as a leading indicator of existing-home purchases given properties typically go under contract a month or two before they're sold.