Buyers still flocking to the market, with pending home sales hitting record in August

Homebuying is still going strong heading into the fall, with people rushing to lock in record low mortgage rates and sign contracts to purchase homes in August.

Pending home sales were up 8.8% to a record high in August, according to the National Association of Realtors. Year-over-year, pending home sales rose 24.2%.

The jump is further confirmation that the home buying season isn't following the usual seasonal trend this year, said George Ratiu, Realtor.com's senior economist.

"Part of this shift can be attributed to a delayed spring home buying season due to lockdowns and buyers who are determined to lock in a historically low rate, despite rising prices and highly limited inventory," Ratiu said.

He said the increase in contract signings is shrinking the already limited number of homes for sale, leaving available housing at some of the lowest levels in recent history. This is causing a massive imbalance to the market's supply and demand, and driving home price increases that are more than double the pace of wages.

"With no signs of these dynamics shifting anytime soon, more price increases are on the way and affordability will continue to be a challenge for many buyers," said Ratiu.

Sales propped up by low mortgage rates

"Tremendously low mortgage rates -- below 3% -- have again helped pending home sales climb in August," said Lawrence Yun, the National Association of Realtors' chief economist.

Yun noted that while pending contracts are at an all-time high, this won't necessarily translate to a record number of home sales. Not all contracts lead to closings.

Still, pending home sales are outperforming many pre-pandemic averages, said Yun. But without enough available homes for sale to meet the demand, the recovery will not be sustainable.

"Home prices are heating up fast," he said. "The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment."

All four regions in the US saw increases in contract activity. In the Northeast, the pending home sales index grew 4.3% and was up 26% from last year. In the Midwest, the index rose 8.6% in August and was up 25% from last year. Contract signings in the South increased 8.6% and were up 23.6% from last year. In the West, pending home sales were up 13.1% in August and up 23.6% from a year ago.