Home Sales Contracts Slip; Mortgage Rates Fall

A home for sale and under contract is seen in Rockville, Md. The National Association of Realtors said its index of sales agreements dropped 2.6 percent last month.
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A home for sale and “under contract” is seen in Rockville, Md. The National Association of Realtors said its index of sales agreements dropped 2.6 percent last month.

A home for sale and under contract is seen in Rockville, Md. The National Association of Realtors said its index of sales agreements dropped 2.6 percent last month.

Paul J. Richards/AFP/Getty Images

A home for sale and “under contract” is seen in Rockville, Md. The National Association of Realtors said its index of sales agreements dropped 2.6 percent last month.

The number of Americans who signed contracts to buy previously occupied homes fell in August from a two-year high in July. Meanwhile, 30-year mortgage rates continued falling, hitting a record low of 3.40 percent this week.

The National Association of Realtors said Thursday that its index of sales agreements dropped 2.6 percent last month to 99.2. In July, the index rose to 101.9. That was the highest level since April 2010, when the market benefited from a federal home-buying tax credit.

A reading of 100 is considered healthy. The index is 10.7 percent higher than it was a year ago. The index bottomed at 75.88 in June 2010 after the tax credit expired.

Contract signings typically indicate where the housing market is headed. There’s generally a one- to two-month lag between a signed contract and a completed deal. Last month, completed sales hit a two-year high.

Most recent data points to steady improvement in the housing market. Home prices rose nationwide in July compared to a year ago, according to the Standard Poor’s/Case-Shiller index. That was the second straight year-over-year gain.

And sales of new homes remained near a two-year high in August, the government said Wednesday.

Builder confidence is at a six-year high and construction of single-family homes rose last month to the fastest annual rate in more than two years.

Sales have been boosted by ultra-low mortgage rates. The average rate on the 30-year fixed mortgage fell to a new record low this week of 3.40 percent, down from last week’s rate of 3.49 percent, Mortgage buyer Freddie Mac said Thursday. The decline suggests the Federal Reserve’s stimulus efforts may be having an impact on mortgage rates.

A limited supply of homes for sale has also helped drive prices up. Higher prices could boost more sellers to list their homes.

Even with the gains, home sales and construction remain well below healthy levels. And many homebuyers, particularly first-time buyers, aren’t able to qualify for mortgage loans.

The average on the 15-year fixed mortgage, a popular refinancing option, fell to 2.73 percent this week, down from the record low of 2.77 percent last week.

The Fed is spending $40 billion a month to buy mortgage-backed securities. The goal is to lower mortgage rates and help the housing recovery. Fed Chairman Ben Bernanke says the program will continue until there is substantial improvement in the job market.

Some economists expect mortgage rates to fall even further because of the Fed’s bond purchases.