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.
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.