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Pending home sales in August were down 7.1% from July and down 18.7% from August 2022, according to data from the National Association of Realtors (NAR).

The trade group’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, registered 71.8 in August; an index of 100 is equal to the level of contract activity in 2001. All four U.S. regions posted monthly losses and year-over-year declines in transactions.

“Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers,” said Lawrence Yun, NAR chief economist. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets. It’s clear that increased housing inventory and better interest rates are essential to revive the housing market.”

Yun added, “The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates. Moreover, the government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance.”