(Bloomberg) -- U.S. pending home sales rose more than expected in August, reaching the highest level on record as low mortgage rates fuel a housing rally.
The National Association of Realtors' index of contract signings to buy previously owned homes surged 8.8% from a month earlier, according to data released Wednesday. Analysts had estimated 3.1%. Compared with 2019, pending sales jumped 24%.
“Tremendously low mortgage rates have again helped pending home sales climb,” said Lawrence Yun, NAR's chief economist.
It was the fourth straight monthly gain for the index, which is now at the highest level in records dating back to 2001. The index has surged since taking a hit when the pandemic froze the housing market in March.
Read more: U.S. Existing-Home Sales Increase to Fastest Pace Since 2006
Record-low mortgage rates have fueled the housing market in recent months as Americans look for more space to spread out and millennials age into homebuying. August is typically a slow month, but the surge this year is partly because the spring-selling season was delayed.
While a flood of mortgage applications shows Americans want to buy houses, the risk is that some won't qualify for loans will struggle to find properties they can afford. High unemployment also threatens to derail the U.S. economic recovery.
Read more: U.S. Housing Boom Threatened by Short Supply of Homes to Buy
A shortage of homes to buy has propped up prices. Some sellers have been reluctant to list their properties in a shaky economy, while builders are grappling with materials shortages and surging lumber prices that have slowed down new construction.
The strong demand for housing, combined with scarce inventory, risks pricing buyers out of the market, according to George Ratiu, senior economist at Realtor.com.
“This is causing a massive imbalance to the market's supply and demand,” Ratiu said in a statement. “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.”
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