As existing home sales dipped in August, so too did contract signings, according to an industry tracker.
The National Association of Realtors (NAR) reported a 1.0 percent decline in its Pending Home Sales Index for August. The drop brings the index down to 104.7, its second highest reading so far this year. Even with the decrease, the index remained above 100 (considered an average level of activity) for the fourth straight month.
The drop in the pending sales measure came in the same month that the association reported a dip in existing home sales. According to NAR, sales of existing homes in August were at a seasonally adjusted annual rate of 5.05 million, down 1.8 percent from July.
NAR Chief Economist Lawrence Yun said the decline in both closed and pending sales reflects declining distressed sales and investor activity.
"Fewer distressed homes at bargain prices and the acknowledgement that we're entering a rising interest rate environment likely caused hesitation among investors last month," Yun said. "With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home."
The shift is problematic for the market, considering the currently weak level of first-time homebuyer activity. According to NAR, first-time buyers have represented less than one-third of all buyers each month for the past two years.
However, Yun remains hopeful.
"The employment outlook for young adults is brightening and their incomes finally appear to be rising," he said. "Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years."
Contract signings slowed down in three of the four Census regions, picking up only in the West, which saw its regional index increase 2.6 percent.
In the other regions: Pending sales were down 3.0 percent month-over-month in the Northeast, 2.1 percent in the Midwest, and 1.4 percent in the South.