August data for the US housing market has been 'mixed' to say the least with a surge in new home sales (thanks to a massive rise in incentives from homebuilders) and a small decline (near multi-year lows), leaving this morning's pending home sales data as the tie-breaker (with expectations of an 'unch' shift MoM).

It appears the drop in mortgage rates is driving some purchase activity as pending home sales soared 4.0% MoM in August - the most since March - dragging sales up 0.5% YoY...

Source: Bloomberg

The MoM surge exceeded all estimates of economists surveyed by Bloomberg.

“Lower mortgage rates are enabling more homebuyers to go under contract,” NAR Chief Economist Lawrence Yun said in a statement.

The big MoM jump lifted the overall pending home sales index off multi-year lows...

Source: Bloomberg

The surge was especially strong in the Midwest, where sales jumped nearly 9% in August, Yun said, which was the most since early 2023. Contract signings also rose in the South and West.

Mortgage rates have fallen to the lowest in a year at 6.34%, encouraging many Americans to get off the sidelines and others to finally list their homes for sale.

While the drop in mortgage rates is welcome, millions of Americans still have rates well below current levels and aren’t inclined to move, which has suppressed inventory and kept prices elevated.

Source: Bloomberg

The supply of existing homes for sale remains near five-year highs, as more people list their homes for sale, but the extra inventory isn’t yet pushing prices down.

Source: Bloomberg

Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold.