US pending home sales unexpectedly drop in August

US pending home sales unexpectedly declined in August, according to data from the National Association of Realtors (NAR).

The NAR’s monthly index fell 2.4% to 108.5 from a downwardly-revised 111.2 in July and is now 0.2% lower compared to August last year’s reading of 108.7. With last month’s drop, the index is now at its second-lowest reading this year after January’s 105.4.

Economists had been expecting a flat reading.

The NAR's chief economist, Lawrence Yun, said: “Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract.

"In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the miniscule number of affordable listings."

Pantheon Macroeconomics said: “The downturn in mortgage applications in the summer has for some time signalled a dip in existing home sales, but we thought it would take longer to emerge in the data. The lag between mortgage demand and sales is usually a few months, but it is variable, and right now the transmission appears to be shorter than normal. A correction to the upside over the next couple of months is entirely possible, and it could be quite substantial.”