The National Association of Realtors said Thursday that its index of sales agreements dropped 2.6 per cent 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 per cent 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.
Contract signings fell in every region but the Northeast, where they rose 0.9 per cent. The sharpest drop was in the West, where pending home sales declined 7.2 per cent. That was partly because of fewer homes available for sale.
Most recent data point 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 per cent. The average rate has been below 4 per cent all year.
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.