Pending Home Sales Rise 1.6% in August, Led by Gains in the West

The numbers: An index of pending home sales increased 1.6% in August, following July’s decline, the National Association of Realtors reported Thursday. Compared with a year ago, contract signings were up 2.5%.

The index captures transactions where a contract has been signed, but the home sale has not yet closed.

What happened: This is only the third month this year in which contract signings have risen, and pending home sales increased across all regions nationwide.

The highest gain occurred in the West, where the pending home sales index rose 3.1% from July. Contract signings also increased 0.7% in the Northeast, 0.6% in the Midwest and 1.4% in the South.

“The notable sales slump in the West region over recent years appears to be over,” Lawrence Yun, chief economist for the National Association of Realtors, said in the report. “Rising demand will reaccelerate home price appreciation in the absence of more supply.”

Big picture: The capping of state and local tax deductions significantly disrupted housing markets in high-tax parts of the country. As people have acclimated to the new normal where taxes are concerned, this headwind has diminished.

More recently, the decline in mortgage rates has begun to lift sales activity nationally. At first the lower interest rates appeared to be merely driving more interest in mortgage refinancing. However, August saw upticks in existing and new home sales and in homebuilding activity.

What they’re saying? “The surge in mortgage applications in both August and September points to new cycle highs for sales around the turn of the year,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. “Sales could well dip a bit over the next month or two, having overshot relative to mortgage applications for the past three months, but the trend is rising.”

Market reaction: The Dow Jones Industrial Average and the S&P 500 moved lower in morning trades, as investors examined the whistleblower complaint released Thursday regarding President Trump’s interactions with the president of Ukraine.

The 10-year Treasury note’s yield also dropped Thursday on the heels of the latest U.S. GDP figures, which indicated that slower economic growth could persist.