Pending home sales fell across the country in August, but out West, where prices are highest, they tumbled, signaling that high prices could finally be exceeding demand.
According to the National Association of Realtors’ (NAR) seasonally adjusted index, pending home sales fell 1.8 percent in August. In the western U.S., pending home sales dropped 5.9 percent month to month and were down 11.3 percent compared with August 2017.
"The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points," according to Lawrence Yun, chief economist at the NAR.
Home prices and mortgage rates have been rising and fewer consumers signed contracts to buy existing homes in August. Pending home sales have now decreased on an annual basis for eight straight months, according to the NAR.
Meanwhile, a recent report by Redfin suggested softening demand for houses. The Redfin Housing Demand Index remained roughly unchanged in August, the fourth consecutive month of lackluster movement.
Redfin reported more price drops and softening demand in previously hot markets.
Meanwhile, according to CoreLogic, in August home sales in the San Francisco Bay area dropped 10 percent year over year, the slowest August in seven years. According to Andrew LePage, an analyst at CoreLogic, the decrease was a direct correlation to waning affordability.
“Waning affordability reflects price hikes and a significant rise in mortgage interest rates this year,” according to LePage. "While the Bay area’s median sale price rose about 12 percent year over year in August, the monthly mortgage payment on the median-priced home jumped 21.5 percent due to a roughly 0.7-percentage-point gain in mortgage rates over that period.”