Lower mortgage rates coaxed more buyers off the sidelines last month, primarily in the Midwest, South and West regions of the country where lower borrowing costs combined with high levels of affordability powered higher-than-expected U.S. pending home sales. Compared to a year ago, sales increased in all regions.

The NAR pending home sales index surged 4.0 percent to 74.7 in August from 71.8 in July. The August consensus was for a 0.7 percent increase in the Econoday survey of forecasters. July's decline was revised up from -0.4 percent to a 0.3 percent drop. August's rise breaks the streak of two consecutive monthly declines and could mean a rebound in existing home sales in August when the time comes to close contracts.

The pending home sales indexes are up in three of four regions (the Northeast was the exception). Sales rose 8.7 percent in the Midwest, 3.1 percent in the South and 5.0 percent in the West. Activity in the Northeast contracted by 1.1 percent.

Supply remains limited compared to demand, with 19 percent of respondents to the NAR survey expecting an increase in buyer traffic over the next three months, up from 16 percent in July, and unchanged from one year ago. However, 19 percent foresee an increase in seller traffic, down from 21 percent in July and up from 18 percent in August 2024.

The consensus looks for a rebound of 0.7 percent in August on the month after a 0.4 percent decrease in July but sales remain sluggish.

The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the pending home sales index which measures home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

The National Association of Realtors moved up its publication schedule in 2011. Prior to 2011, the reference month was two months trailing the release date. In 2011, the reference month trails only by one month to the release month.