California pending home sales drop in August

Buyers signed fewer contracts for homes in California last month, as higher mortgage rates hampered demand, according to a new report.

Pending home sales fell 5% in August from July, the California Assn. of Realtors said Monday. The group’s pending-sales index dropped 9% from last year. The index represents contracts signed but not yet closed -- a sign of future market activity.

“Rising interest rates over the past several months at the specter of a tapering of the Fed’s stimulus program sent buyers to the sidelines in August,” the association’s chief economist, Leslie Appleton-Young, said in a statement.

IN DEPTH: Five key takeaways on America’s housing market

Still, Appleton-Young said the Federal Reserve’s decision last week to maintain its massive bond-buying program should send mortgage rates lower, helping out prospective buyers.

Freddie Mac’s survey of lenders -- taken before the Fed’s announcement -- showed the average rate for a 30-year fixed mortgage dropped to 4.5% last week, from 4.57% a week earlier.

Though mortgage rates may take a breather for the moment, economists predict that the Fed’s announcement will only delay an eventually rise to 5% or higher.

The Realtors group also said inventory expanded slightly in August, although it remains extremely tight. The supply of non-distressed homes for sale inched up to 3.1 months in August, from three months in July.

A supply of six months is considered normal.

ALSO:

Fed surprise fuels stock and concern

Buy vs. rent: purchase advantage slipping away, study says

Freddie Mac: 30-year mortgage rates fall to 4.5%; Fed helping